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.”

Quite.

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.

 

Read this next

Market News

Stock Market Analysis: Is NVDA Losing Its Leadership?

Since the beginning of the week, the S&P 500 Index (US500) has seen a modest increase of about 0.58%, whereas NVDA’s share price has experienced a decline of approximately 3.8%. This recent divergence raises concerns among Nvidia stock investors — could it signify a loss of NVDA’s market leadership?

Industry News

ESG: Australian regulator wins first greenwashing court case against Vanguard

Vanguard admitted that a notable portion of the securities within both the Index and the Fund did not undergo the promised ESG scrutiny.

Fintech, Uncategorized

BitMEX integrates HALO from Solidus Labs for cross-market surveillance

““The recent approval of the Spot Bitcoin ETF has piqued the market’s interest. As a result of price volatility, the trading volumes for crypto derivatives have gone up substantially. HALO, with its advanced technology and crypto-native detection architecture, will enable BitMEX to smoothly and safely scale trade surveillance across its increased trading volumes and provide the necessary safeguards for new product launches.”

Reviews

IUX Broker Review

IUX, recently rebranded from IUX Markets, stands as a multi-asset Forex broker recognized for its regulatory compliance across various jurisdictions.

Industry News

Horizon Software rebrands to Horizon Trading Solutions

“Horizon Trading Solutions has seen accelerated global growth over the past year to meet the rising demand for our trading solutions and built-for-purpose technology offering. The choice to rebrand represents a key part of this development, while maintaining our heritage and history in the industry.”

Market News

USDJPY has surged to levels last witnessed in 2022. Should we consider opening a short position?

The recent resurgence of the US dollar has propelled USD/JPY to new heights, touching levels not seen since 2022. This surge comes against the backdrop of stable short-term yields and ongoing economic data that fails to signal a significant slowdown, prompting questions about the extent of current monetary easing measures.

Digital Assets

DED Trends on Twitter After Memecoin Snapshot Announcement

Polkadot-backed community coin #DED, made it to the trending charts on X, demonstrating community’s engagement and interest behind the memecoin. 

Digital Assets

BlockDAG Presale Nears $10 Million Amid Toncoin’s Momentum, Green Bitcoin’s Presale, and the Rise of Other Top Cryptos

This article will examine three top trending topics: Toncoin’s potential, Green Bitcoin’s innovative presale, and BlockDAG’s sustainable mining approach. These cryptocurrencies take centre stage for their uniqueness and innovation.

Digital Assets

Coinbase scores minor victory vs SEC, but lawsuit to proceed

A federal judge in Manhattan, U.S. District Judge Katherine Polk Failla, ruled on Wednesday that the U.S. Securities and Exchange Commission’s (SEC) lawsuit against Coinbase can largely proceed.

<