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Three Ways to Identify a Crypto Scam, According to Gary Gensler

Gary Gensler

In addition to price volatility, what characterizes the crypto industry and sometimes puts off novices is the difficulty in detecting false projects. A skill that seasoned investors have that is, however, beyond appearances accessible to all. There are thus signs allowing any investor to avoid being caught in the trap.

These red alerts that the informed investor does not ignore

During a Twitter Space he had with the US military in early January, Gary Gensler, the chairman of the Securities and Exchange Commission (SEC) spoke about the crypto market and the risks inherent in it. On this occasion, he delivered some warning signs that signal that a crypto project is probably a scam set up from scratch.

Newbie investors usually ignore these signals out of negligence or ignorance. But basically, these are basic investment principles that experienced investors never ignore. According to Gensler’s explanation, there are at least three.

Gary Gensler Gives Tips for Spotting Crypto Scams

The first is the inability of the crypto project to provide transparent documentation, which simply explains the plan that will be followed to achieve the goals. The second signal consists in the inability of the promoters to establish the compliance of their initiative with the regulations in force. If, in addition, the latter set up mechanisms promising, for example, high returns, vigilance is required.

“If something seems too good to be true, it’s because in reality, everything is most often false”Gensler said.

The crypto industry, the ” Far west “ ?

The intervention of the head of the SEC describes the crypto industry as a cynical environment, where the law of the strongest reigns. There are over 15,000 cryptos in circulation today, which could crash overnight. According to Gary Gensler, this will largely be linked to the low level of state interference in this sector.

” Most of them [des cryptos, Ndlr] do not comply with securities laws when they should. It’s the Wild West” launched Gensler.

For Caroline Crenshaw, commissioner of the SEC, who also participated in the exchanges, “it is important to understand that crypto is new and speculative” and that investor protection is relatively weak. This is because the majority of companies have chosen not to submit to the requirements of the SEC.

This position of the stock market policeman on the crypto industry could partly explain his relentlessness in rejecting most of the requests for conversion into ETFs sent to him by companies. A choice that has currently earned him several lawsuits.

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Luc Jose Adjinacou

Far from having dampened my enthusiasm, an unsuccessful investment in a cryptocurrency in 2017 only increased my enthusiasm. I therefore resolved to study and understand the blockchain and its many uses and to relay with my pen information relating to this ecosystem.