The U.S. Securities and Exchange Commission (SEC) sent out a warning today from its Investor Teaching and Advancement wing, urging citizens to be wary of initial coin offerings (IEOs).

In a January. 14 argument on its website, the SEC said:

"Be cautious if considering an investment in an IEO.  Claims of new technologies and financial products, such as those associated with digital asset offerings, and claims that IEOs are vetted past trading platforms, can be used improperly to entice investors with the false promise of high returns in a new investment infinite.  As described below, IEOs may be conducted in violation of the federal securities laws and lack many of the investor protections of registered and exempt securities offerings."

IEOs take over

Similar to 2022'southward initial coin offering (ICO) blast, the IEO scene defenseless burn in early 2022 equally an influx of projects took reward of diverse cryptocurrency exchanges to launch their tokens directly on those platforms.

Binance's launchpad hosted significant traffic in early on 2022 with several projects listing IEOs on the platform. Fetch.Ai (FET) tallied $6 million within a infinitesimal of the start of its Feb. 25 IEO, Cointelegraph reported in 2022.

The SEC catches upwards

Later raging popularity in 2022, ICOs faced oestrus from the SEC in late 2022 equally the committee cracked down on the new fundraising method.

The authorities bureau has chased down several ICOs over the past two years for offering unregistered securities, applying related penalties.

According to the SEC's post today, the regulating body is showing signs of pursuing similar inspections of IEOs, noting IEOs may require registration with the bureau, depending on the offer.

The SEC said the exchange hosting the IEO might also need multiple forms of approving and licensure from the commission.

Additionally, the committee wrote that IEOs must be in line with federal securities laws, adding:

"It is a ruby flag if the IEO and its participants, including the online trading platform, do not address or hash out the applicability of the federal securities laws."

The SEC urged potential investors to be wary of IEOs, platforms and related advocates touting misleading registrations and approvals. "There is no such affair as an SEC-approved IEO," the SEC postal service stated.

Cointelegraph reached out to the SEC for details just received no comment equally of press fourth dimension. This article will be updated accordingly upon receipt of a response.