The United States Securities and Exchange Commission (SEC) recently issued an investor alert related to the rise of cryptocurrency scams throughout the country.
The SEC published this notice following recent news regarding a $2 billion crypto scam called BitConnect. Civil and criminal charges have been filed against BitConnect and related parties, including its founder and several promoters.
Many fraudsters have used the pandemic as a tool to exploit investors of all types, many of which are amateur investors with little to no crypto experience. Fraudsters commonly promise investors that their coins are “risk-free” and “high-yield,” which is rarely the case in any investment. These promises are tempting for amateur investors who are less savvy than experienced investors.
Thus, the SEC advises investors to be cautious when dealing with digital assets. Digital assets, according to the SEC, include crypto, coins, and initial coin offerings (ICOs).
Some people have done very well with their crypto investments. However, past performance of some investors is no guarantee of future results for everyone.
Many people see Bitcoin and think “If only I invested when it first started, then I’d be a millionaire!” This fear of missing out(FOMO) unfortunately drives many people to pour money into cryptocurrencies and other digital assets that are doomed to fail.
BitConnect reportedly promised that investors could achieve returns as high as 40% on the platform. Achieving 40% returns may be possible, in theory, but it is highly unlikely for the average investor. This is especially true when figures like this are promised outright. In many cases, these numbers are unrealistic and simply used to entice people to invest with the company.
The SEC also warns investors to be wary of testimonials from celebrities and influencers who promote the company. These individuals are often paid simply because they are well-known and influential, which will bring exposure to the company. In some cases, a company may even pay people to act as if they were customers who made a ton of money using the company’s platform, product, or service.
Unfortunately, many people believe these testimonials wholeheartedly. Instead, investors should take these testimonials with a grain of salt. In an ideal world, investors would simply ignore these altogether. The SEC advises investors not to make decisions solely based on these testimonials, since we never know whether the testimonial is legitimate or not.
If you are in need of additional resources to avoid becoming a victim of a scam, check out more information on our blog or the SEC’s investor.gov resource.
If you suspect any fraud or wrongdoing in your investment portfolio, please contact us to speak with an experienced financial attorney. Vernon Litigation Group represents investors across the nation in a variety of financial disputes, including investment and securities fraud, FINRA arbitration, breach of fiduciary duty, disputes with financial institutions, and more.
Call us at 239-319-4434 for a confidential, no-cost consultation today.