FINRA Warns on Crypto-Related Stocks
Many have become so enamored with anything that is crypto-related that they are willing to make investments that they may not normally make.
Clearly the draw, and awe, to this space is due to the dynamic growth we’ve seen in the price of cryptos, especially Bitcoin, and its underlying technology Blockchain. Look no further than the instant rise in the stock prices of companies that have altered their names to include Blockchain.
Crypto-related stocks
Many who may not be ready to buy Bitcoin, or other cryptos, may be more willing to buy the stocks of crypto-related companies. Consider what happened last week when the company Long Island Iced Tea changed its name to Long Blockchain Corp.
As quickly as its price soared on the name change, it fell on Friday, along with anything else related to cryptos.
Interesting about Long Blockchain is that it’s a beverage maker. Its business does not incorporate Blockchain. The company simply states that it wants to.
As noted by Bloomberg, so far, the company has little to show for its Blockchain aspirations.
It has no agreements with any Blockchain firms, and says “there is no assurance that a definitive agreement with these, or any other entity, will be entered into or ultimately consummated.” A request for comment from Chief Executive Officer Philip Thomas wasn’t immediately returned. - Bloomberg
No one is calling Long Blockchain a scam, but it’s a prime example of what unsuspecting investors could fall for in their quests to join the crypto bandwagon.
FINRA warns
Long Blockchain’s huge stock price soar impressed many. However, it’s an example of what people should be watchful for, according to the tips provided by FINRA. It notes that investors should be wary of stocks with huge spikes in price because this could signal potential manipulation or fraud.
As far as companies that may be getting in on the crypto space by rebranding themselves to include crypto-related names, FINRA also made some comments.
Especially in today’s “hot” cryptocurrency environment, it’s easy for companies or their promoters to make glorified claims about new products, services and other cryptocurrency-related connections. And, even when legitimate companies flock to a hot, new sector, fraudsters almost always follow suit, exploiting the news to launch their latest frauds du jour. Follow these tips to avoid costly mistakes.
Clearly be leery about people who call you on the phone pushing a stock, warns FINRA. And of course be suspect of anyone who makes guarantees that an investment will perform a certain way, or makes pushy sales pitches that encourage you to “act now.”
Remember, you can check to find out whether a company has filed the appropriate documents to issue securities by going to theSEC's EDGAR database.
After you’ve read these reports, remember that a company that has registered its securities or filed reports with the SEC doesn't mean that the company will be a good investment, notes FINRA.
Also, FINRA says that investors should know where the stock trades and pay attention to any cautions associated with the stock. For example, it states that most stock pump-and-dump schemes tend to be quoted on an over-the-counter (OTC) quotation platform like theOTC Markets. Look for icons next to stocks that are meant to warn investors of concerns associated with a given company.
These include a stop sign to indicate the company cannot or will not provide important information to regulators, exchanges or the OTC Markets—and also a skull and crossbones to warn that the security, company or a person who controls the company might be involved in a spam campaign, questionable marketing, regulatory action or more.
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