The rapid growth of Bitcoin and other cryptocurrencies has led to a “digital gold rush,” as aspiring investors buy and trade shares of digital currencies.
The burgeoning cryptocurrency market is a hotbed for investment scams.
While the crypto market has produced profits for some, it also presents risks that the average investor may not fully understand. The SEC has repeatedly warned about the risks of investing in cryptocurrencies due to the currencies being poorly understood and having weak investor protections. These factors have proven to be fertile ground for fraudsters promoting cryptocurrency investment scams.
If you suffered significant financial losses from investing in a cryptocurrency scheme, contact the Business Trial Group for a free case review.
Bitcoin, the original cryptocurrency, was released in 2009 as a peer-to-peer electronic cash system. Since Bitcoin is based on open-source blockchain technology, it has spawned numerous competitor cryptocurrencies. Today there are thousands of cryptocurrencies. Bitcoin remains the largest currency in terms of market capitalization, but others, such as Ripple, Ethereum, and Litecoin, have also seen their values skyrocket.
Some cryptocurrencies can be used for a wide range of transactions, although Bitcoin and other digital tokens are limited by how widely they are accepted as payment. Others are designed for specific purposes, such as the cannabis market, web browser advertising, and photography.
Cryptocurrency is bought and sold on a currency exchange—an online platform that serves as an intermediary between cryptocurrency buyers and sellers. Popular exchanges include GDAX, Kraken, and Binance.
Funds can be raised for a new cryptocurrency venture through an initial coin offering (ICO). ICOs are similar to initial public offerings (IPOs), except that investors are offered digital tokens, such as Bitcoins, instead of stock.
Did you lose money on a crytpoccurency scam? Receive a free case review.
Cryptocurrency Risks and Scams
Bitcoin’s value ballooned from around $1,000 per coin in January 2017 to nearly $20,000 per coin in December 2017. Just two months later, Bitcoin plunged back below $8,000.
But the volatility of the cryptocurrency market may not be its riskiest aspect. A new cryptocurrency can be created at any time by any company or individual. Coupled with the fact that the cryptocurrency market is largely unregulated, there are many potential risks to investors participating in crypto and ICO markets.
The SEC warns that crypto markets have far fewer investor protections than traditional securities markets.
The Securities and Exchange Commission (SEC) has issued Investor Alerts concerning cryptocurrencies and ICOs. In July 2017, the SEC warned that ICOs “can be used improperly to entice investors with the promise of high returns in a new investment space.” In December 2017, SEC cautioned that cryptocurrency markets feature “substantially less investor protection than in our traditional securities markets, with correspondingly greater opportunities for fraud and manipulation.”
Despite these efforts, cryptocurrency scams remains prevalent, and investors need to be on the lookout for fraud. Many of the red flags for crypto scams are similar to traditional investment scams, such as guaranteed returns, pressure to act quickly, or an opportunity that sounds too good to be true.
The SEC has compiled a list of questions investors should ask before investing in a cryptocurrency or ICO opportunity. They include:
- Who is issuing or sponsoring the product?
- Where is my investment money going and what will it be used for?
- Will I receive financial statements?
- Is there trading data?
- How, when, and at what cost can I sell my investment?
- Does the investment comply with securities laws?
- Do I have legal protections in the event that something goes wrong?
The Business Trial Group Can Help Victims of Crypto Fraud
In the Wild West atmosphere of cryptocurrency and ICO markets, investors may fall prey to fraudulent schemes despite taking the appropriate cautions. The Business Trial Group can help you recover your digital coin investment losses. We handle all investment cases on a contingency-fee basis, so you pay no upfront fees, and no fees at all unless we recover money for you.
Receive a no cost and no risk review of your investment losses during a free case review.