Gary Gensler, chairman of the US Securities and Exchange Commission, has listed three ways to identify a fraudulent cryptocurrency project.

According to him:

“If something looks too good to be true, sometimes it is. There are certain red flags that you can also look for.”

He claims that the three signs of a potential scam are the project does not have clear documentation on how it works and plans to achieve its goals, the company does not demonstrate compliance with regulatory requirements and the founders of the project cannot explain in simple words what it is.

He has warned users against offers of high yields and calls for hasty investments with reference to FOMO.