The US Securities and Exchange Commission (SEC) has released a new alert, warning investors about the risk of fraud in the digital currency industry.
Lack of controls, oversight
According to the SEC, there are several warnings signs that investors should watch out for when considering investments in bitcoin ventures.
Specifically, it noted that investors should be wary of investment offers that come from unlicensed or unsolicited sources. Sales pitches that seem overly aggressive or that guarantee high returns, the release said, should be warning signs for every investor.
The SEC indicated that investors who generated significant earnings during bitcoin's price boom in 2013 are particularly at risk of investment fraud. Additionally, participants in bitcoin forums like Bitcoin Talk face the risk of getting involved with fraudulent investments, such as an initial public offering (IPO) scheme.
The organisation also noted in the alert that the hype surrounding bitcoin may make it harder for investors to determine whether a particular investment opportunity is fraudulent:
Continued SEC scrutiny
The investor alert mirrors a report issued last year by the SEC, which explained the risk of Ponzi schemes involving digital currency. At the time, the SEC expressed concern that the rise in digital currency would lead to greater risks for investors because of a lack of regulatory guidance.
In recent months, the SEC has begun looking into potential fraud in the bitcoin marketplace as well.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.