SEC Chairman Addresses Crypto Fraud Methods: How Do We Identify Fraudulent Altcoins?

US Securities and Exchange Commission (SEC) President Gary Gensler recently spoke about cryptocurrencies in a Twitter Spaces room. The risks of investing in crypto were discussed in an audio session attended by US Army, SEC executive Caroline Crenshaw and Gensler.

SEC executives “How can we detect if a crypto project is a scam?” sought an answer to his question. Gensler started his speech with the following words while listing three criteria for scam project detection:

“If a project looks too good to be true, investors should be careful. There are some criteria for you to detect fraudulent altcoins.”

Gensler laid out three main items for fraud detection.

  • The project has not created a clear whitepaper on how it works or how it will achieve its goals.
  • Does not provide clear information about token distribution,
  • According to Gensler, if the developers can’t explain themselves easily, it is highly likely that the project is fraudulent.

The SEC chief also pointed out the promises of high returns, and “FOMO” stated that they should not be influenced.

“Most Cryptocurrencies Are Not Securities”

The Chairman of the Securities and Exchange Commission also spoke about the regulations. Mentioning that most cryptocurrencies are not securities, Gensler “Wild West” defined as. The SEC chief finally stated that by the end of the day, most of the 15,000 altcoins will sink.

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