The Commodity Futures Trading Commission (CFTC) has offered a reward to whistle-blowers who give information on Virtual currency and digital token “pump-and-dump” schemes.
“If you have original information that leads to a successful enforcement action that leads to monetary sanctions of $1 million or more, you could be eligible for a monetary award of between 10 percent and 30 percent,” CFTC said while issuing a Customer Protection Advisory.
The Advisory warns customers to beware of and avoid pump-and-dump schemes that can occur in thinly traded or new “alternative” virtual currencies, digital coins or tokens.
It warns customers against purchase of crypto currencies based on social media tips or sudden price spikes.
The US regulatory body advised customers to thoroughly research virtual currencies, digital coins, tokens, and the companies or entities behind them in order to separate hype from facts.
Pump-and-dump schemes, known as “boiler room” frauds, have been around long
before virtual currencies and digital tokens.
Today’s pump-and-dumpers organize anonymously and hype the currencies and
tokens using social media and mobile messaging apps.
These pump and dumps occur in the largely unregulated cash market for virtual currencies and digital tokens, and typically on platforms that offer a wide array of coin pairings for traders to buy and sell. The number of new virtual currency and digital coin traders has grown substantially, increasing the number of potential victims or unwitting perpetrators.
These are the guidelines that CFTC issued to Customers to steer clear of frauds:
Don’t purchase digital coins or tokens because of a single tip, especially if it comes over social media; Don’t believe ads or websites that promise quick wealth by investing in certain digital coins or tokens; Do not participate in pump-and-dump trades because market manipulation is against the law and many participants end up losing money; There is no such thing as a guaranteed investment or trading strategy. If someone tells you there is no risk of losing money, do not invest.