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SEC Chairman Gary Gensler spoke at a Twitter meeting organized by the US Army about altcoins that could upset investors. According to Gensler, who started 3 methods, crypto investors should pay attention to these red flags…

Gary Gensler warns of scam altcoins

“If something seems too good to be true, sometimes it really is,” the SEC Chair said during Twitter Spaces. According to Gensler, “detecting a crypto scam is not as difficult as it seems.” Gensler, who teaches Blockchain classes at MIT, shared 3 clear signs with the crypto community and investors by coming up with these projects:

  • If the crypto project does not provide clear documentation of how it works or how it plans to achieve its goals
  • If the project cannot demonstrate that it complies with the legislation
  • If the project cannot easily explain what it is.

Gensler also said that high-yield bids are a red flag, warning of altcoins that are overly complex or that seek high “FOMO” that rush the investor to make a decision. The SEC chairman later reiterated his belief that many cryptocurrencies can be unregistered securities:

Most cryptocurrencies do not comply with securities laws, but they must. This is the Wild West, I’d say you really have to wonder if there’s an ‘out there’.

“Most altcoins will fail”

Offering a grim view of the future of the crypto market, Gensler says the majority of the more than 15,000 projects currently on the market will ultimately fail. SEC member Caroline A. Crenshaw, who participated in the publication, said, “It is important to understand that cryptocurrency is new. “There are really, really reduced investor protections because most of them didn’t choose to go under the SEC mandate.”

Drawing attention to the history of crypto fraud, Crenshaw says there needs to be more transparency in the industry. According to the SEC member, “They are known for their scams and claim to be transparent. Whatever is on the blockchain is transparent, but the rest of what is out there is not.”

FTX crisis continues to affect the market

While Crenshaw doesn’t refer to FTX by name, he thinks Sam Bankman-Fried’s crashed crypto exchange continues to haunt the crypto market. FTX, once a dominant player in the market, went bankrupt in November after a listed bank. The liquidity crisis forced the company to admit that it had no one-to-one reserves of client funds and eventually filed for bankruptcy. We have included the details in this article.

Bankman-Fried has since been on probation and has been charged with eight financial crimes, including fraud and money laundering conspiracy in connection with the stock market crash. There are currently billions of unaccounted client assets, and millions of clients still do not know if they will ever see these funds again.

“The point is, there is an increased risk when you invest in these new, speculative, volatile investments that really lack fundamental protections and regulations,” SEC member Crenshaw said during Twitter Spaces. “If you are considering investing in crypto, think about how much of your portfolio you are dedicating to it and certainly no more than you can afford to lose,” he added.

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