SEC Issues New Warnings Regarding Online Cryptocurrency Trading


As cryptocurrency trading continues to grow in popularity among casual investors, and as new initial coin offerings (including fraudulent initial coin offerings) become increasingly common, the Securities and Exchange Commission (SEC) is warning investors to be wary of the risk of cryptocurrency scams. In a recent Investor Alert, the SEC discusses some of the more-recent scams and provides some tips investors can use to help protect their portfolios.

Advance Fee Fraud Scams Involving Bitcoin and Other Cryptocurrencies

As identified by the SEC, one recent trend in cryptocurrency scams involves individuals promoting fake investments in coin mining facilities and new cryptocurrency technologies with no intention of ever actually investing investors’ funds – and in many cases with no legitimate business at all. As the SEC explains:

“SEC and CFTC staff have recently observed investment scams where fraudsters tout digital asset or ‘cryptocurrency’ advisory and trading businesses. In some cases, the fraudsters claim to invest customers’ funds in proprietary crypto trading systems or in ‘mining’ farms. The fraudsters promise high guaranteed returns (for example, 20-50%) with little or no risk.

“After the investors make an investment, typically using a digital asset such as Bitcoin, the fraudsters in some cases stop communicating with the investors altogether.  These fraudsters can quickly send your money overseas, with little chance of you being able to get it back. Sometimes the fraudsters direct investors to pay additional costs (such as purported taxes) to withdraw fake ‘profits’ earned from the investment.”

While these scams may be novel in their use of Bitcoin and other cryptocurrencies, the basic concept behind them is not new: Scam artists prey on unsuspecting and unsophisticated investors who want to earn as much as they can as quickly as possible. In order to do so, they make promises that seem to be too good to be true (because they are), but which are also extremely enticing to investors who do not understand the risks involved.

Warning Signs for Cryptocurrency Fraud Scams

However, in hindsight, the risks are often painfully obvious. In order to avoid falling victim to cryptocurrency fraud scams, the SEC advises investors to watch out for “warning signs” such as:

  • “Guaranteed” high investment returns
  • Language you do not understand
  • Unlicensed brokers and sales agents
  • Promises that seem too good to be true
  • Unsolicited cryptocurrency investment “opportunities”
  • Pressure to invest immediately

Are You a Victim of Cryptocurrency Fraud?

If you have lost Bitcoins in an advance fee fraud scam, if you invested in a fraudulent initial coin offering (ICO), or if you have fallen victim to any other type of cryptocurrency fraud, it is important that you seek legal representation immediately. It may be possible to recover your losses, but you may need to act quickly in order to do so. To speak with a financial fraud lawyer at Zamansky, LLC, request a free initial consultation today.

Request a Free Initial Consultation at Zamansky, LLC

Zamansky, LLC is a financial fraud law firm that represents cryptocurrency investors nationwide. To discuss your situation with one of our lawyers in confidence as soon as possible, call 212-742-1414 or contact us online now.