“If it seems too good to be true, it probably is” – Unknown

British Columbia Securities Commission Cautions Investors of Cryptocurrency Scams

The British Columbia Securities Commission (BCSC) has issued a warning to BC residents on the risks of investing in cryptocurrencies, joining their Ontario counterparts (OSC) and the Bank of Canada in warning investors. The primary concern is that the relatively young market for cryptocurrency is poorly regulated and is breeding ground for scammers. Indeed, the crypto market has been dubbed “the wild west” by many analysts, including former hedge-fund manager Mike Novogratz.

For example, in standard stock markets, there is a well-known and illegal scheme known as the “pump & dump”. The pump & dump involves a person buying a stock at a cheap price, artificially inflating the stock’s price through false and misleading statements, and then cashing out when the stock price has risen. However, in the lightly-regulated world of cryptocurrency, this tactic is not regulated in any way.

In fact, there are companies whose sole operational model involves building paid subscription bases, and then targeting specific cryptocurrencies, at specific times, telling their subscribers when to buy, creating hype around the specific cryptocurrency and running up the price, and then telling their subscribers when to sell. They brazenly advertise their intent to pump & dump as a means to attract subscribers with explanatory videos!

This is a textbook example of the pump & dump scheme in action, but because of the lack of regulation, coupled with crypto investors’ so-called “fear of missing out” (FOMO) on a rapidly-rising cryptocurrency valuation, this is technically legal and can be very effective.

The BCSC has also stated that BC residents should exercise “extreme caution” when considering Initial Coin Offerings (ICOs), where companies attempt to raise capital by issuing newly created cryptocurrencies. The BCSC specifically highlighted unsolicited ICO offerings as dangerous and has asked people who receive such offers to contact the BCSC.

WEEKLY MARKET WRAP-UP

North America

• The TSX closed at 16162, up 179 points or 1.12% over the past week. YTD the TSX is down -0.29%.
• The DOW closed at 24715, down -116 points or -0.47% over the past week. YTD the DOW is down -0.02%.
• The S&P closed at 2713, down -15 points or -0.55% over the past week. YTD the S&P is up 1.46%.
• The NASDAQ closed at 7354, down -49 points or -0.66% over the past week. YTD the Nasdaq is up 6.53%.
• Gold closed at 1292, down 2.00 points or -1.97% over the past week. YTD gold is down -1.37%.
• Oil closed at 71.35, up 0.83 points or 1.18% over the past week. YTD oil is up 18.09%.
• The USD/CAD closed at 0.7765, down -0.0052 points or -0.67% over the past week. YTD the USD/CAD is down -2.36%.
• The MSCI closed at 2126, up 2 points or 0.09% over the past week. YTD the MSCI is up 1.09%.

Europe/Asia

• The Euro Stoxx 50 closed at 3574, up 8 points or 0.22% over the past week. YTD the Euro Stoxx 50 is up 2.00%.
• The FTSE closed at 7779, up 54 points or 0.70% over the past week. YTD the FTSE is up 1.18%.
• The CAC closed at 5615, up 73 points or 1.32% over the past week. YTD the CAC is up 5.68%.
• DAX closed at 13078, up 77.00 points or 0.59% over the past week. YTD DAX is up 1.24%.
• Nikkei closed at 22930, up 171.00 points or 0.75% over the past week. YTD Nikkei is up 0.72%.
• The Shanghai closed at 3193, up 30.0000 points or 0.95% over the past week. YTD the Shanghai is down -3.45%.

Fixed Income

• The 10-Yr Bond Yield closed at 3.07, up 0.1000 points or 3.37% over the past week. YTD the 10-Yr Bond Yield is up 27.92%.

Sources: Dynamic, Advisor.ca, CNBC.com