CFTC: “Ponzi schemers looking to capitalize on attention focused on virtual currency”

CFTC associates cryptocurrency with ponzi type schemes and bucket shop operations, and that certain schemes involving virtual currency marketed to retail customers, such as off-exchange financed commodity transactions with persons who fail to register with the CFTC will be banned. Quite right too.

Hot on the heels of yesterday’s perspective by FinanceFeeds that Initial Coin Offerings (ICO) are of no intrinsic value and represent a modern ponzi scheme in which a huge noise is made by students in mainstream tabloid press wishing to propagate the latest buzzword without substance, which fans the flames of the fraudulent intentions of those diverting their former schemes into a new one with a very similar potential outcome, American regulatory authority, the CFTC, has produced a comprehensive report this week.

The report focuses on the regulator’s concern that opportunists may resort to these measures, exactly as described yesterday by FinanceFeeds.

‘Crypto’ and ‘ICO’ are certainly overused buzzwords, and in many cases, those entering ICO enterprises come directly from the fraudulent binary options sector.

This week’s CFTC report states “Certain schemes involving virtual currency marketed to retail customers, such as off-exchange financed commodity transactions with persons who fail to register with the CFTC” will be strictly forbidden by the regulator.

The report further states “There is also a risk of Ponzi schemers and fraudsters seeking to capitalize on the current attention focused on virtual currencies.”


With regard to the actual virtual currency-orientated schemes that now proliferate cyberspace, whilst the CFTC details that “Some virtual currency platforms may be selling you virtual currency directly from their own account – these types of transactions may give the platform unfair advantages and sometimes resemble fraudulent “bucket shop” schemes.”

That perfectly describes the structure of an ICO, which is a ruse used to obtain money by people who have been turned down by experienced investors because they have no product and no capital, are attempting to dupe members of the public to give them money, so that they can use it to pretend to make something that doesn’t exist, paid for by something that doesn’t exist, and exchange legal tender which has a value, for a tender that doesn’t exist in order to fund a company that doesn’t exist, whose core business is around a product that doesn’t exist.

The structure of an ICO is exactly that. An off-exchange financed commodity transaction with persons who fail to register with the CFTC, and is effectively false money changing hands to buy nothing. Air-ware. A con.

The CFTC also made its position clear today with regard to the risks associated with fraud and manipulation, stating “Unregistered virtual currency platforms may not be able to adequately protect against market abuses by other traders.”

Considering that there are already two nations with highly developed and modern FinTech-driven economies, those being South Korea and China, that have banned ICOs in their entirety, it appears that the US is taking a similar approach.

The FBI and the regulators are well aware of who has been perpetrating binary options fraud in the United States, and are likely to know where the ICO rush is coming from.

The CFTC’s jurisdiction is implicated when a virtual currency is used in a derivatives contract, or if there is fraud or manipulation involving
a virtual currency traded in interstate commerce.

Beyond instances of fraud or manipulation, the CFTC generally does not oversee “spot” or cash market exchanges and transactions involving virtual currencies that do not utilize margin, leverage, or financing.

This is the initial and very pioneering report by the CFTC on this subject, but considering the nefarious backgrounds of most ICO and cryptocurrency ‘entrepreneurs’ and their intentions of raising money via what is effectively a black market for something that does not exist, is likely to be taken a dim view of.

Britain’s regulators have not yet made their perspective clear, however the law in Britain is somewhat different, as raising money through fraudulent virtual currency related schemes in the UK is a common law matter rather than one for the regulator to enforce.

British law contains a very stringent aspect termed “Obtaining money by deception” which is punishable by jail. If asking for money for something that doesn’t exist is not obtaining money by deception, then who knows what is.

FinanceFeeds holds the view that cryptocurrency and its related ‘investment’ schemes such as ICOs, are never going to be accepted as part of a mainstream financial system, will never be a contributor to institutional FinTech and is the preserve of the back streets, hence this view is now growing.

In a year’s time, the word ‘binary’ will be largely replaced by ‘ICO’ in the dark streets of Ramat Gan and in anticipation, the US authorities are beginning to prescribe their defense against the next barrage of dubious schemes perpetrated by those who are already under a massive FBI microscope for the last ones.


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