A US financial watchdog is warning investors about crypto 'pump and dump' schemes

  • FINRA, the US financial regulator, put out an alert on Thursday to warn investors about risks associated with investing in companies linked to the cryptocurrency space.
  • Share prices of companies connected to the booming crypto market have skyrocketed recently.
  • Even companies with no history in the space have jumped on the crypto bandwagon.

Cryptomania is in full swing and one US regulator wants investors to be vigilant about scammers and fraud in the booming market for digital coins and blockchain technology.

The Financial Industry Regulatory Authority (FINRA) said in an alert Thursday investors should consider the risks associated with putting money into companies linked to the cryptocurrency space.

“Cryptocurrencies (such as Bitcoin) are in the news daily,” the agency said. “FINRA is issuing this Alert to warn investors to be cautious when considering the purchase of shares of companies that tout the potential of high returns associated with cryptocurrency-related activities without the business fundamentals and transparent financial reporting to back up such claims.”

Pivoting to blockchain is proving to be lucrative for some otherwise unheard of companies. On Thursday, The Long Island Iced Tea Corporation announced it was changing its name to Long Blockchain. Gaming company Veltyco saw its stock price leap higher on Thursday after telling investors it has “commenced discussions with blockchain and cryptocurrency providers” about potential partnerships. The growing trend is reminding some people of the dot-com bubble of the late 1990’s.

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FINRA said investors should do their research before investing in such companies, warning about potential “pump and dump” schemes.

“And don’t be fooled by unrealistic predictions of returns and claims made through press releases, spam email, telemarketing calls or posted online or in social media threads,” the agency said. “These actions may be signs of a classic “pump and dump” fraud.”

The US Securities and Exchange Commission, another US financial regulator, has also up its scrutiny of the cryptocurrency space. It temporarily suspended trading of securities of The Crypto Company, a California-based firm whose shares have skyrocketed more than 17,000% since it first began trading in September.

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