South Africa’s financial authority is warning the public against the rising number of cryptocurrency scams in the country. The warning comes after over 260,000 investors lost close to a billion dollars in a local BTC Ponzi scheme. The Financial Sector Conduct Authority warned that it’s receiving many complaints from South African investors who have lost their savings through cryptocurrency scams. The financial watchdog reminded investors that digital currency investments “are not regulated by the FSCA or any other body in South Africa.”
Financial regulator warns investors of risks investing in crypto.
“As a result, if something goes wrong, you’re unlikely to get your money back and will have no recourse against anyone,” the FSCA said in the statement. It further outlined the major risks that investors must be aware of if they are to invest in digital currencies. They include investment firms “overstating the potential pay-outs or understating the risks.” Investing in cryptocurrencies is very risky, and as such, investors must be prepared to lose all their money. There’s no guarantee that cryptocurrencies could be converted back to fiat currencies, the FSCA continued.
There’s no underlying basis for the value determination of digital currencies.
There’s no underlying basis for value determination of cryptocurrencies, the financial regulator stated. Rather, their prices are dictated by “the underlying mood or sentiment of the general public.” It alluded to market manipulation, claiming that digital currency prices are driven by people who have an interest in the value of the currency. Cryptocurrency scams operators apply this manipulation technique to pump up prices of their tokens to lure investors who are afraid of missing out. Once they bring in the investors, they dump the tokens at a fraction of their original price.