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Ponzi Scheme Fraudsters Drawn to Virtual Currencies

The Security Exchange Commission (SEC) is warning investors about fraudulent investment schemes that use virtual currencies. Ponzi scheme fraudsters often use virtual currencies as an easy way to deceive potential investors.

Ponzi Schemes

Ponzi schemes are investment scams that prey on potential investors. Ponzi scheme fraudsters promise to invest an investor's funds in opportunities with little risk and high financial returns. However, rather than investing in legitimate money-making opportunities, they use the funds from new investors to pay returns to existing investors, as well as themselves. Every year in the U. S., thousands of eager, unsuspecting investors fall victim to Ponzi schemes and turn to a securities litigation attorney to recover investments.

Ponzi scheme fraudsters use the latest technological innovations to entice investors. Virtual currencies, such as Bitcoin, are often used by fraudsters because they provide an easy way to hide real assets. They can be used to purchase goods and services online and easily traded on online exchanges. Virtual currencies facilitate fraudulent transactions and investments by providing fraudsters with less oversight of regulations and more privacy benefits than transactions made with conventional currencies.

Red Flags for Investor Fraud

Many Ponzi schemes have red flags that can alert potential investors to the possibility of fraud. Before investing, investors should do diligent research and discuss investment plans with a securities litigation attorney who can authenticate investments. Common red flags include:

  • Investments with Little Risk and High Returns: Investments offering high return rates usually have higher risks. Investors should be skeptical of investments that generate consistently high returns, regardless of market conditions.
  • Unlicensed Sellers and Unregistered Investments: According to federal and state laws, most investment firms and professionals must be licensed or registered. Many Ponzi scheme fraudsters are unlicensed and have investments that are not registered with the Securities Exchange Commission or state securities regulators.
  • No Investor Qualifications: Most legitimate investment opportunities require accredited investors. If questions are not asked to verify an investor's salary or net worth, the investor should be suspicious of potential investor fraud.
  • Complex Fee Structures and Hidden Paperwork: Investments with complex fee structures that are hard to understand and/or paperwork that's not accessible may be a deliberate attempt to confuse an investor and hide investment details.
  • Difficulty Receiving Payments: Ponzi scheme fraudsters often encourage investors to reinvest promised payments by offering higher investment returns. Difficulty receiving or cashing returns on investments are a common red flag for investor fraud.

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The information contained in The Firm’s posts on its blog, fraud alerts, investigations or elsewhere on the site is based upon information obtained from other sources including, but not limited to, news outlets and federal, state, and regulatory agency filings. All suspects and subjects of postings herein are presumed innocent until proven guilty in a court of law or administrative action and any and all crimes are alleged until a court or regulatory agency finds otherwise .

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