How to avoid Bitcoin Ponzi schemes
August 26, 2014Bitgazetteer
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That’s the gist of a new warning from the Securities and Exchange Commission.
The SEC’s Office of Investor Education and Advocacy is issued investor alert to warn individual investors about fraudulent investment schemes that may involve Bitcoin and other virtual currencies .
Common Red Flags of Fraud
1. High investment returns with little or no risk – every investment carries some degree of risk, and investments yielding higher returns typically involve more risk. “Guaranteed” investment returns or promises of high returns for little risk should be viewed skeptically.
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2. Overly consistent returns. Investments tend to go up and down over time, especially those seeking high returns. Be suspect of an investment that generates consistent returns regardless of overall market conditions.
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3. Unregistered investments – to check if investments have been registered. visit the SEC site to search the company. . For further information contact your state’s regulator.
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4. Unlicensed sellers – Federal and state securities laws require certain investment professionals and their firms to be licensed or registered. Many Ponzi schemes involve unlicensed individuals or unregistered firms. Verify Individuals and Firms Here.
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5. Secretive and/or complex strategies and fee structures. Rule of thumb: avoid investments you don’t understand or for which you can’t get complete information.
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6. Issues with paperwork. Be skeptical of excuses regarding why you can’t review information about the investment in writing. Always read and carefully consider an investment ’s prospectus or disclosure statement before investing. Be on the lookout for errors in account statements which may be a sign of fraudulent activity.
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7. Difficulty receiving payments. Be suspicious if you don’t receive a payment or have difficulty cashing out your investment . Ponzi scheme organizers some times encourage participants to “roll over” promised payments by offering higher investment returns.
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8. It comes through someone with a shared affinity. Fraudsters often exploit the trust derived from being members of a group that shares an affinity, such as a national, ethnic or religious affiliation. sometimes, respected leaders or prominent members may be enlisted, knowingly or unknowingly, to spread the word about the “investment.”