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SEC warns investors on backing cryptocurrency after halting ICO

The U.S. Securities and Exchange Commission on Dec. 11 cautioned investors against backing cryptocurrencies the same day it halted an initial coin offering, Reuters reported.

"There is substantially less investor protection than in our traditional securities markets, with correspondingly greater opportunities for fraud and manipulation," SEC Chairman Jay Clayton said.

"If an opportunity sounds too good to be true, or if you are pressured to act quickly, please exercise extreme caution and be aware of the risk that your investment may be lost," he added after the regulator issued a cease and desist order for restaurant review app Munchee Inc.'s launch of an initial coin offering, or ICO.

ICOs must comply with federal rules on the issuance of securities, including SEC registration or exemption qualifications allowing issuers to sell shares privately to accredited investors, Clayton said. Many cryptocurrency trading platforms may be violating laws requiring them to register as an exchange or as an alternative trading platform, he said.

SEC officials said the order to stop Munchee's ICO launch showed the regulator would intervene to address ICO registration violations even in the absence of fraud claims, Reuters reported.

Munchee planned to launch an ICO and offer so-called MUN tokens but failed to register the security, which the SEC argued was a requirement since investors could reasonably expect a future profit on MUN tokens.