Is pump and dump legal or illegal? US regulator warns against pump and dump cryptocurrency schemes

US regulator warns against pump and dump cryptocurrency schemes. CFTC in the US has issued a clear warning against pump and dump schemes which are being operated in cryptocurrency assets. This warning comes close on the heels of warnings of two other regulators in the United States.

A pump and dump warning by CFTC:

CFTC issued this warning in order to protect investors against the pumping and dumping of cryptocurrencies. According to the director of public affairs at CFTC, Erica Elliott, these techniques are not in the interest of the normal public. It is ultimately the normal public which will be losing a lot of money owing to these techniques. This is the reason why they are alerting the public regarding such a kind of fraud.

Pump and dump tactics:

She further explained that these pump and dump techniques encourage the investors to buy cryptocurrencies due to certain rumors. When the buying is on the higher side, the price of cryptocurrencies is inflated. Even at these inflated prices, investors start buying due to the rumors. This is when the operators will start selling. Once the operators start selling, there will be panic among the cryptocurrency investors. Most of the retail investors will also start to sell. In such a case, the retail investors who bought at the rear end of the rally will be losing a significant amount of money. This is the modus operandi of pump and dump techniques. That is why she thinks that it is important to warn the investors regarding this.

Pump and Dump Guidelines:

According to CFTC, it is important for the organization to maintain the interests of the investors. That is why the agencies are targeting the investors to 1st research about the cryptocurrencies. When they are able to buy with the help of right kind of research, they will be able to choose the right cryptocurrencies. They will be able to keep away from the inflated cryptocurrencies as well. This will ensure that in the longer term, they will be able to make a good amount of return.

SEC and Finra Pump and Dump warnings

In the recent past, SEC and Finra have also warned the investors against the pump and schemes as well as the inflating of the cryptocurrency prices.

It is in the interest of the cryptocurrency investors to ensure that they are researching about the cryptocurrencies properly before buying them. When they are able to do so, it will be easier for them to indeed make a good amount of return by investing in cryptocurrencies.

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Adam Webb is editor in Smartereum, blockchain and currency news, where he produces updates on Blockchain, Ethereum and other alternative cryptocurrencies.


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