SEC Issues Bitcoin Warning (May 8, 2014)
Suggesting that investments in digital currencies, such as Bitcoin, might carry with them a higher risk of fraud and a harder time recovering losses in the event of fraud or theft, the SEC yesterday issued an investor alert regarding the decentralized P2P currency.
“A new product, technology or innovation—such as Bitcoin—has the potential to give rise both to frauds and high-risk investment opportunities,” according to the SEC’s Office of Investor Education and Advocacy. “Potential investors can be easily enticed with the promise of high returns in a new investment space and also may be less skeptical when assessing something novel, new and cutting-edge.”
The alert warns that fraudulent investment opportunities often include “guaranteed” high returns on investment, unsolicited offers, no net-worth or income requirements and solicitation by unlicensed sellers. “Scam artists may take advantage of Bitcoin users’ vested interest in the success of Bitcoin to lure these users into Bitcoin-related investment schemes,” the SEC writes.
If an investor of digital currency is defrauded, options to recover lost funds could be limited because the currency can be difficult to trace, the transactions can be international in scope and there is no central authority that collects Bitcoin user information, among other factors.
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