The defendant advertised a Bitcoin “investment opportunity” in an online Bitcoin forum, promising investors up to 7% interest per week and that the invested funds would be used for Bitcoin activities. In July 2013, the SEC charged an individual for an alleged Bitcoin-related Ponzi scheme in SEC v. Unlike traditional currencies, Bitcoin operates without central authority or banks and is not backed by any government.īitcoin Ponzi scheme. dollar, or used to purchase goods or services, usually online. What is Bitcoin?īitcoin has been described as a decentralized, peer-to-peer virtual currency that is used like money – it can be exchanged for traditional currencies such as the U.S. In addition, the North American Securities Administrators Association (NASAA) included digital currency on its list of the top 10 threats to investors for 2013. The Financial Industry Regulatory Authority (FINRA) also recently issued an Investor Alert cautioning investors about the risks of buying and using digital currency such as Bitcoin.
We previously issued an Investor Alert about the use of Bitcoin in the context of a Ponzi scheme. 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.
A new product, technology, or innovation – such as Bitcoin – has the potential to give rise both to frauds and high-risk investment opportunities. The rise of Bitcoin and other virtual and digital currencies creates new concerns for investors. The SEC’s Office of Investor Education and Advocacy is issuing this Investor Alert to make investors aware about the potential risks of investments involving Bitcoin and other forms of virtual currency.
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