The U.S. Financial Industry Regulatory Authority (FINRA) is warning investors about the threat of cryptocurrency-related stock scams.
“Especially in today’s ‘hot’ cryptocurrency environment, it’s easy for companies or their promoters to make glorified claims about new products, services and other cryptocurrency-related connections,” FINRA says in an investor alert. “And, even when legitimate companies flock to a hot, new sector, fraudsters almost always follow suit, exploiting the news to launch their latest frauds du jour.”
Against that background, the alert cautions investors against buying the stock of companies that tout the prospect of high returns from their cryptocurrency activities without business fundamentals and transparent financial reporting to back up their claims. The U.S. Securities and Exchange Commission has already suspended trading in a number of securities due to questions regarding the accuracy of their crypto claims, the FINRA alert notes.
FINRA reminds investors to do their research before purchasing any security, to check registration, and it warns that stocks that experience huge price spikes “could signal potential manipulation or fraud”.