SEC chairman told how to distinguish a fraudulent crypto project

The head of the US Securities and Exchange Commission (SEC), Gary Gensler, gave recommendations to fans of cryptocurrencies regarding the verification of crypto projects for fraudulent nature. He shared tips as part of the Twitter Spaces.

He said that just because a cryptocurrency project looks too good to be true, it doesn't necessarily mean it isn't. Nevertheless, in the world of digital assets, one must be extremely careful not to stumble upon the trick of scammers. He highlighted some points that need to be paid special attention.

According to Gary Gensler, the first alarm bell for potential investors should ring when a project does not have clear documentation about how it works and how the founders of the enterprise are going to achieve their goals. It is noteworthy that crypto scammers have adapted so much that they create roadmaps for the most outspoken scam projects. For this reason, one should especially read their documents and look for inconsistencies in logic.

The second reason why investors should question the feasibility of the project, Gensler called the lack of compliance with regulatory requirements. The third reason why cryptocurrency enthusiasts may doubt the reliability of the project is the inability of the developers to explain in simple terms what their project is like. If the documents and the demonstration of the project are replete with abstruse words, and the developers cannot explain anything in simple words, then this is a sure sign of a fraudulent enterprise.

Gary Gensler also added that scammers often use marketing tricks to get investors to invest their money. To do this, they resort to limited offers, promises of very high returns and calls for hasty investment, while pressing on the feelings of lost profits of potential savers. The chairman of the US Securities and Exchange Commission once again noted that he does not consider most digital assets to be registered securities.

The head of the SEC warned listeners against offers of high yields and calls for hasty investments with reference to FOMO. He recalled that he considers most digital assets to be unregistered securities.

Gary Gensler's advice is undeniably useful and can help investors avoid fraudulent schemes, however, his actions often cause a lot of criticism from many people both involved in the world of digital assets and those who are more committed to the traditional financial market.

For example, Tom Emmer, who is a member of the US House of Representatives, accused Gensler of the fact that the SEC could not normalize the regulation of the digital asset industry, and the collapse of FTX happened, among other things, through the fault of the US Securities and Exchange Commission.

Brad Garlinghouse, who previously served as president of Ripple, also accused Gensler of inaction. He argued that the SEC chairman does not want to do a proper job of regulating digital assets, citing Gensler's claims that cryptocurrencies should be regulated in exactly the same way as ordinary securities. This statement also caused a lot of dissatisfied feedback from people.