Read that over a few times. Are those two words beginning to sound similar? That’s what the founders of My Big Coin, Inc. were hoping when they created their cryptocurrency investment offering. The Nevada-based company has been accused of defrauding investors hoping to cash-in on the recent investment trend. The Commodity Futures Trading Commission (CFTC) recently filed a lawsuit alleging the company used false and misleading information to steal from cryptocurrency investors. The My Big Coin founders preyed on the investor frenzy surrounding virtual currencies, like the popular Bitcoin – which has been yielding dizzyingly high returns – and widespread misunderstanding of the digital assets. By simply choosing a name that sounded vaguely familiar to “Bitcoin”, the company managed to solicit a total of $6 million from 28 investors. In what the CFTC essentially refers to as a Ponzi Scheme, My Big Coin, Inc. solicited investors and wooed them with false claims about values and usage of the fraudulent cryptocurrency. The fraudsters used investments from incoming investors to pay off initial investors, thereby sustaining the appearance of healthy investor returns. Other earnings were used to purchase lavish personal items.

New Players, Same Old Game

What this should teach us – aside from the alarming fact of how widely unregulated the cryptocurrency boom remains – is that cryptocurrency scams are just variations on a theme. In other words, they’re a new dog with the same old tricks. While cryptocurrency is a new and currently-evolving asset class, the investment scams cropping up around them are nothing more than the same ones fraudsters have been using for years – just adapted to suit the current climate. What makes these particular scams especially dangerous is the apparent lack of information investors have regarding cryptocurrency investing or even what cryptocurrency is for that matter. Fraudsters are able to so easily take advantage of investors because of the widespread insufficient understanding of the asset.

Don’t be an Ignorant Investor

We all know the phrase “ignorance is bliss”. However if you’re an investor, ignorance is sure to get you into hot water sooner than later. You need to be completely aware of not only in what you are investing, but also the how and why you are investing.

In the case of My Big Coin, investors allowed themselves to get caught up in the hype and fervor over the virtual currency boom. Realistically, little research (if any) was probably done on the company, with investors choosing to rely on fraudulent earnings reports showing big returns. The trouble is, it is not just novice investors falling victim to cryptocurrency scams. Fraudsters continue relying on the same old scamming methods, because they continue to work. While the blind hype around virtual currencies has certainly made it easier for scammers to dupe some investors, other fraudsters are getting more creative. By employing the basic tactics of “tried and true” investment fraud schemes, scammers create elaborate and complex scams that can dupe even experienced investors. The fact is, virtual currencies remain largely unregulated and existing measures are shaky, at best. Cryptocurrency as, an emerging investment class, continues to evolve at a rapid pace and regulators are constantly playing catch-up.

Blindspots in Oversight Leave Room for Cryptocurrency Scams

While there is an effort to ramp up enforcement and oversight for crypto-assets, regulators are warn that investor protection – like investment-loss recovery – is largely insufficient or non-existent. Unfortunately, these conditions are ripe for fraud. As you might imagine, severe lack of oversight and minimal enforcement of a new and widely misunderstood investment class probably sounds like the perfect opportunity for fraudsters, or what financial industry regulators call, ‘bad actors‘.

Until sufficient measures can be put in place, regulators are imploring investors to exercise caution and practice due diligence before committing to any investment opportunity. The Securities and Exchange Commission (SEC) is warning investors interested in Initial Coin Offerings (ICO) to be especially vigilant, as cryptocurrency scams involving this investment offering have been on the rise. In December, the SEC issued a public statement warning investors of the regulation realities. In it, SEC Chairman Jay Clayton states:

Investors should understand that to date no initial coin offerings have been registered with the SEC. The SEC also has not to date approved for listing and trading any exchange-traded products (such as ETFs) holding cryptocurrencies or other assets related to cryptocurrencies.[2] If any person today tells you otherwise, be especially wary.

Currently, lawmakers and regulators are meeting to discuss building a stronger regulatory infrastructure for cryptocurrency investing. SEC Chairman Jay Clayton and CFTC Chairman J. Christopher Giancarlo appeared at a Senate hearing to discuss legislators’ concerns over crypto-assets.

Spotting ICO and Other Cryptocurrency Scams

Despite their apparent vulnerabilities, cryptocurrency investments remain popular. Even regulators have to concede some merit to the use-potential of crypto-assets. In that same December statement warning of industry risks, Clayton also recognized the effectiveness of initial coin offerings as fund raising method for entrepreneurs and startup businesses. The world of virtual currency industry is very much a modern Wild West; there’s promise and potential, but there are also dangers. Until the dust finally settles, regulators stress that investors need to remain vigilant against fraud. There are many resources available to educate investors interested in learning more about cryptocurrency. If you are considering a cryptocurrency investment offering, check out these resources:

• SEC
  • Ponzi Schemes Using Virtual Currencies
  • Sample Questions for Investors Considering a Crytpocurrency or ICO Investment Opportunity
• CFTC
  • Primer on Virtual Currencies
  • Virtual Currency Resource page
• FINRA
  • “Don’t Fall for Cryptocurrency-Related Stock Scams”

For even more information on cryptocurrency scams and news updates, check out our blog.

Pyramid/PONZI Scheme

Now, this one should be familiar to everyone. Pyramid schemes, also called Ponzi schemes may be the most popular form of investment fraud. Pyramid schemes are perpetuated by duping investors into selling the same product or service to mostly friends and family.

Promissory Notes

Promissory notes are a type of debt-investment. In turn for an investor’s loan to a company/party, the investor is paid back a fixed return on the original amount from the company/party. Though it can be a good, legitimate investment option, many people fall victim to risks that are too low and returns that are too high.

Currency Trading

Trading currencies is an exotic and appealing form of investment. Due to it’s complex nature though, it can be a huge potential investment risk

Precious Metals

Like trading currencies, investing in precious metal can be appealing, but investors should be wary of the risks. It is not easy for investors to guarantee reserve amounts of precious metals they have invested in. This makes it easy for scammers to set up fraudulent investment schemes.

Unregistered Securities

Don’t be fooled by how good a potential investment appears. Investment scams happen most often because the provided documents and correspondence outlining the investment looks real enough. Don’t settle for looks, make sure to thoroughly vet your investments. Though these represent popular top investment scams, fraudsters are always coming up with new methods for cheating investors. Make sure you properly discuss any new investments with a trusted broker and your bank before committing any finances. The Securities and Exchange Commission offers a variety of tools and resources for investors If you feel you are the victim of an investment scam, contact Savage Villoch Law today and we will assess your situation.

Avoiding Investment Scams:

• Spam email promising high returns for investing in clean-up or relief efforts
• Pump-and-dump schemes: circulation of false or misleading news that promotes a certain product or service, inflating its stock and then dumping it before the trend peaks
• Ponzi schemes: investment scams that use investor money to pay-off prior investors
• Always ask thorough questions before involving yourself in an investment opportunity
• Avoid schemes that promise fast, high returns
• Make sure to know exactly what you are getting in a claim payout. If receiving a lump-sum payment, know beforehand what the money will need to cover for you and your family

You have enough to worry about following a storm or disaster. Don’t let the threat of investment scams be one of them. Protect yourself and your finances. If someone approaches you with an investment opportunity following Hurricane Matthew or another natural disaster, contact Savage Villoch Law, PLLC and make sure your investment is protected.

Some people in Florida and other states try to scam others out of their money instead of making an honest income. Two tricks these con artists use are called Ponzi and pyramid schemes. Knowing how these methods of deception work can help you protect your money, but a Florida investment fraud attorney could help if you have already fallen victim to one of these schemes. Ponzi Scheme In a Ponzi scheme, someone lures others in by telling them about a supposed investment opportunity with little risk that yields a high reward. This sounds too good to be true because it is as these schemes are funded by paying existing investors with the money from new investors. This scam looks like it works because the earlier investors get paid, but the revenue dries up if there are no new investors or too many investors want to collect their money at the same time. Pyramid Scheme One can supposedly get rich by making one payment for a product then recruiting others with a pyramid scheme. This can look legitimate because a real product might be involved, but money is made by getting others to become distributors. This falls apart because the number of people needed to fund others grows with each new person recruited. With both schemes, money from new participants is used to fund others and support the appearance of a successful venture. With legitimate ventures, investments are typically registered while vendors should have audited financial statements. If you think you are a victim of investment fraud, contact us today so that we can start helping you.

Have you lost money due to the careless mistakes or intentional fraud of a stockbroker or other financial adviser? Using FINRA arbitration, we may be able to recover your loss. An FINRA claim is made on investment deals with stocks, annuities, mutual funds and bonds. Using a Florida stock market attorney, you can see justice for your wrongdoing. If you have a claim against a financial advisor or stockbroker, they are required to go to arbitration before FINRA. Rather than a long drawn out court hearing, the Financial Industry Regulatory handles the session. There will be 1-3 arbitrators at the hearing, and a decision will also be made at that time. The wait for a hearing takes about a year. It depends on the size of the claim as to how many arbitrators will be assigned. More than 60% of all cases are settled, and there’s no need for a hearing. These circumstances are difficult, and there is much paperwork. An investment fraud attorney can help with the FINRA arbitration case and get your money back. What are the most common types of investment fraud, they are: •High-return or “risk-free” investments•Pyramid schemes•Ponzi” schemes•Internet Fraud•Affinity Fraud•Poor Advice on Financial Investments There are many different types of scams that can put your money in jeopardy. When your money is on the line, you need someone to represent your best interests. At Savage Law, we know how hard you’ve worked for your money. We do everything we can to get you the compensation you warrant. Contact us today to schedule a consultation.