The U.S. Securities and Exchange Commission (SEC) issued an investor alert on Thursday, urging caution around crypto asset securities, saying that firms offering crypto investments might not be complying with U.S. laws.
The SEC also said that unregistered offerings in crypto asset securities might not provide investors key information for informed decision-making, including audited financial statements.
The SEC further warned that “investments in crypto asset securities can be exceptionally risky, and are often volatile, with a number of major platforms and crypto assets becoming insolvent and/or losing value in the past year.”
Fraudsters continue to exploit the rising popularity of crypto assets to lure retail investors into scams, often leading to devastating losses, the SEC said.
“It is never a good idea to make an investment decision just because someone famous says a product or service is a good investment. A celebrity endorsement does not mean that an investment is appropriate for all investors, or even that it is legitimate,” the SEC added.
The agency urged crypto investors to have an investing plan, as well as to understand their risk tolerance and time horizon.
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The SEC warning comes after the securities regulator sent Coinbase a “Wells Notice” stating that SEC staff had advised the cryptocurrency exchange that it had made a “preliminary determination” to recommend that the SEC file an enforcement action against the company for alleged violations of the federal securities laws.
Global regulators are now keeping a watchful eye on the crypto sector after high-profile collapses wiped out more than a trillion dollars from the digital assets industry’s market capitalization in 2022.
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