Bitcoin is in the news again as the SEC issued an Investor Alert earlier this month in order to warn potential investors of the risks of investing in Bitcoin and other types of virtual currencies. The SEC notes that Bitcoin is a decentralized, peer-to-peer virtual currency that can be exchanged for traditional currencies or used to purchase goods or services. These exchanges usually occur online. Bitcoin is differentiated from other forms of virtual currencies in that it is not backed by any government and operates without any central authority or oversight.
In the Investor Alert, the SEC also points out that there is a heightened risk of fraud in investments involving Bitcoin and that such innovative technologies are often coupled with fraudsters trying to take advantage of the technology. Numerous warning signs of fraud exist, including guaranteed high investment returns, unsolicited sales pitches, unlicensed sellers, no net worth or income requirements for investors, and pressure to purchase quickly. Another issue is that there are few recovery options for Bitcoin losses due to fraud or theft. Finally, investing in Bitcoin carries with it certain unique risks: lack of insurance, exchange rate volatility, potential governmental restrictions, and the possibility that Bitcoin exchanges may stop operating due to fraud, technical difficulties, hackers, or malware. Clearly, investors need to carefully consider the potential ramifications before investing in Bitcoin.
If you or someone you know has lost money as a result of an investment, please contact Richard Frankowski at 888-741-7503 to discuss your potential legal remedies.