Another week of negative press for cryptocurrency serves as the latest warning to investors about the high risk and seedy underside of the crypto market. Today’s Wall Street Journal features an article describing hundreds of Bitcoin-type offerings as showing the “Hallmarks of Fraud.” A WSJ investigation revealed hundreds of initial digital coin offerings which included plagiarized investor documents, false promises of guaranteed returns, and missing or even fake executive teams.
The WSJ article comes on the heels of news earlier this week that prosecutors had indicted three co-founders of an initial coin offering backed by boxer Floyd Mayweather for securities fraud, wire fraud, and two counts of conspiracy. According to the charges, the team mislead investors by falsely claiming that their company had partnered with MasterCard and Visa to issue virtual currency debit cards.
In an effort to increase awareness of the typical warning signs of scam initial coin offerings (ICOs) and promote investor education, the SEC announced this week that it had launched a mock ICO website which includes details typical of those featured on fraudulent ICO websites, such as promises of guaranteed returns, celebrity endorsements, and a countdown clock that is “quickly running out on the deal of a lifetime.” On the SEC site, however, a potential investor who clicks to “Buy Coins Now” is instead taken to the SEC’s website established to help investors avoid fraud.
Finally, as a reminder of the actual financial harm caused by crypto fraud, a Fortune article this morning highlights the loss of $52 billion this week alone in virtual currencies tracked by coinmarketcap.com. The losses follow what was supposed to be a rebound week for crypto during this week’s Consensus 2018 conference in Manhattan: a celebrity-hyped event designed as essentially a flashy “pep-rally” for crypto investments.
Investors, especially those who are not extreme risk takers, should obviously exercise extreme caution when considering buying cryptocurrency. Warren Buffett has recently gone on record describing bitcoin and those like it as “speculating” rather than investing and has predicted an almost certain “bad ending” for cryptocurrencies.
If you or someone you know lost money as the result of a cryptocurrency investment which was unsuitable for you or was pitched to you based on misleading claims or phony documents, please call the Frankowski Firm at 888.741.7503 or fill out this contact form.