Shearman & Sterling LLP | FinTech Insights | CFTC Issues First Customer Advisory on Virtual Currency Pump-and-Dump Schemes
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  • CFTC Issues First Customer Advisory on Virtual Currency Pump-and-Dump Schemes
    02/15/2018
    The Commodity Futures Trading Commission has issued its first customer advisory regarding pump-and-dump schemes in virtual currency markets. The CFTC warned customers to exercise extreme caution when investing in virtual currency listings promoted on social media, reportedly backed by famous high-tech business leaders and investors or accompanied by posts creating false urgency or telling investors to purchase right away.

    The CFTC noted particular concern with the anonymous nature of virtual currencies, which makes enforcement actions against pump-and-dump schemes difficult. These schemes may occur in the largely unregulated virtual currency cash markets, over which the CFTC only has anti-fraud and anti-manipulation enforcement authority.

    Additionally, the CFTC stated it has received multiple complaints from customers who have suffered losses due to virtual currency pump-and-dump schemes. The CFTC warned that virtual currencies should only be purchased after they have been thoroughly researched and that customers should avoid purchasing virtual currencies based on sudden price spikes.

    The CFTC also encouraged market participants to come forward with any information that could lead to an enforcement action against a virtual currency pump-and-dump scheme.