360° Coverage : SEC Warns Investors To Beware Of Bitcoin

2 Updates

SEC Warns Investors To Beware Of Bitcoin

May 9 2014, 10:59am CDT | by

For the second time in months, the Securities and Exchange Commission issued a warning alerting investors about the hazards of Bitcoin and other virtual currencies. The move marks another effort by...

Filed under: news

 
 
 

20 weeks ago

SEC Warns Investors To Beware Of Bitcoin

May 9 2014, 10:59am CDT | by

For the second time in months, the Securities and Exchange Commission issued a warning alerting investors about the hazards of Bitcoin and other virtual currencies. The move marks another effort by regulators to come to grips with a revolutionary technology that has been the darling of both Silicon Valley and the media. And it underscores the government’s concerns over the dangers virtual currencies pose to retail investors.

“A new product, technology, or innovation – such as Bitcoin – has the potential to give rise both to frauds and high-risk investment opportunities,” the SEC’s alert exclaimed on Wednesday.

The SEC is most concerned with the hype surrounding the new technology and the tendency for investors to switch off their skepticism when approached with an opportunity that is both little understood and promoted as the next get-rich-quick investment. Much of the language used by the commission – it warns investors to be weary of any investment that “sounds too good to be true,” for example – could apply to the latest can’t-miss financial product, a miraculous cure for a terminal disease, or any other exotic investment fad.

Bitcoin’s enigmatic characteristics make it all the more feasible for swindlers to dupe would-be investors. It is a digital, non-fiat currency that allows for some level of anonymity for users. Its value has fluctuated wildly and without many reliable institutions offering consumer-friendly access to the currency, it has remained obscure to mainstream users. Yet, though few people have begun to use the currency, its meteoric rise against the dollar – it went from nearly zero to a high eclipsing $1,100 in the span of a few months last year – along with the well-publicized endorsement it has received from Silicon Valley heavyweights such as Netscape founder Marc Andreessen have infused the technology with an aura of excitement last seen with the rise of Facebook and Twitter.

This combination makes it ripe for abuse, specially for investors desperate to capture the type of oversized returns enjoyed by early-movers in the Internet and social media.

It has also drawn concern from regulators. Last summer, the SEC brought an action against Bitcoin Savings and Trust for allegedly running a Ponzi scheme that defrauded dozens of investors of nearly $5 million. The Justice Department has also targeted individuals and companies that have used Bitcoin and other virtual currencies to conduct or mask criminal behavior.

They are not alone but the government’s response, unlike the SEC’s recent alert and the DOJ’s prosecutions, hasn’t always been negative. In March, 2013, FinCEN, the unit within the Treasury Department assigned to combat money laundering and other financial crimes, required virtual currency exchanges and other businesses to adhere to anti-money laundering laws. The move, which came as a surprise to many Bitcoin backers, granted the technology instant legitimacy by allowing the virtual currency to operate within the government’s legal framework rather than facing an outright ban. FinCEN’s guidance ushered in a wave of investments from established venture capital firms that had remained on the sidelines fearing that the virtual currency would not receive the government’s imprimatur.

More recently, the Internal Revenue Service issued guidance in March categorizing virtual currencies as property. And just yesterday, the Federal Election Commission weighed in, declaring that PACs may receive donations in bitcoins.

Led by New York Department of Financial Services Superintendent Benjamin Lawsky, state regulators have also been trying to determine how to apply preexisting laws to Bitcoin, which can serve as a currency, commodity, or transfer mechanism of various forms of property or information.

So far, the regulatory response to Bitcoin and other virtual currencies has been tepid as regulators try to balance a desire to promote the potentially revolutionary technology while still protecting consumers and investors from fraud. Several key regulators have also declined to chime in at this point: neither the Federal Reserve Bank nor the Commodity Futures Trading Commission have issued formal guidance. And, on the surface at least, the regulatory response has taken on a shape-shifting quality with each agency categorizing Bitcoin differently. In that sense, at least, the regulatory response mirrors Bitcoin, the technology that no one has been able to neatly classify.

 
Update
2

4 weeks ago

Khazanah throws MAS RM6b lifeline

Aug 29 2014 5:01pm CDT | Source: Business Times Singapore

August 30, 2014 1:15 AMKHAZANAH Nasional will inject RM6 billion (SS$2.4 billion) over three years to resuscitate loss-making Malaysia Airlines (MAS) under a recovery plan that includes even an Act of Parliament. Other key moves are migrating its operations, assets and liabilities to a new company (NewCo) and slashing the workforce of 20,000 by 30 per ce ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 
Update
1

4 weeks ago

MAS posts loss of RM307m for Q2

Aug 28 2014 5:00pm CDT | Source: Business Times Singapore

August 29, 2014 1:13 AMMALAYSIA Airlines (MAS) registered a loss of RM307 million (S$122 million) for the second quarter to end-June, but warned of worse to come in the second half when the "full financial impact of the double tragedies of MH370 and MH17" hits ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

China warns of dengue risk during National Day holidays
Beijing, Sep 29 (IANS) The Chinese Center for Disease Control and Prevention (CDC) Monday warned public to stay alert about dengue exposure during the week-long National Day holiday beginning Oct 1.
 
 
Play after school makes the minds of kids sharper
New York, Sep 29 (IANS) If your child cannot wait to play after school, better not to restrict him, a study suggests.
 
 
OPEC daily basket price closes lower
Vienna, Sep 29 (IANS/WAM) The basket of 12 crude oils of the Organization of Petroleum Exporting Countries (OPEC) closed at $94.13 a barrel Friday, compared to $94.25 a barrel last Thursday, the OPEC Secretariat said.
 
 
Scorpion venom to fight brain cancer
Washington, Sep 29 (IANS) Scientists have received approval from the US Food and Drug Administration (FDA) to use "Tumour Paint", a product derived from scorpion venom for study in human trials in the US, in an effort to treat people suffering from brain cancer.
 
 
 

Latest from the Network

Black Friday Schedule 2014 Released
Black Friday 2014 is in 60 days, but the first Black Friday sales will already start in 1 month. Over the last couple of years, Black Friday has become a month-long sales event with multiple special events. I4U News has...
Read more on Black Friday Countdown
 
Asian Games: Discus thrower Seema Punia wins gold
Incheon, Sep 29 (IANS) India's discus thrower Seema Punia won the gold medal while her compatriot Krishna Poonia finished fourth in the 17th Asian Games at the Incheon Asiad Main Stadium here Monday. Chinese Xiaoxin...
Read more on Sport Balla
 
Brad Pitt believes in institution of marriage
Los Angeles, Sep 29 (IANS) Actor Brad Pitt, who exchanged vows with his long-term partner and actress Angelina Jolie in August, says marriage is more than just a title. The 50-year-old actor shared his views on...
Read more on Celebrity Balla
 
Clooney, Alamuddin to make things official Monday
Rome, Sep 29 (IANS) Newly married couple George Clooney and British human rights lawyer Amal Alamuddin will officialise their marriage in Venice today. The couple, who wed Saturday at a private star-studded ceremony,...
Read more on Celebrity Balla
 
China warns of dengue risk during National Day holidays
Beijing, Sep 29 (IANS) The Chinese Center for Disease Control and Prevention (CDC) Monday warned public to stay alert about dengue exposure during the week-long National Day holiday beginning Oct 1. A total of 12,...
Read more on Business Balla
 
Robot to figure out if Thai cuisine is genuine or not
Bangkok, Sep 29 (IANS) The Thai government is set to unveil a robotic taster that will determine if the food you have ordered anywhere in the world at a Thai restaurant is genuine or not. The "e-delicious" machine...
Read more on Politics Balla
 
Asian Games: Bajrang wins silver, Narsingh bronze
Incheon, Sep 29 (IANS) Indian wrestler Bajrang had to remain content with the silver medal after losing his final bout while his compatriot Narsingh Pancham Yadav clinched the bronze in the 17th Asian Games at the...
Read more on Sport Balla
 
Modi US visit: Three Indian cities to be named for smart cities project
Washington/New Delhi, Sep 29 (IANS) Three Indian cities are in line to be adopted for the government's "smart cities" project by way of technology and infrastructure upgrade during Indian Prime Minister Narendra Modi's...
Read more on Politics Balla
 
Play after school makes the minds of kids sharper
New York, Sep 29 (IANS) If your child cannot wait to play after school, better not to restrict him, a study suggests. Moderate-to-vigorous physical activity for at least 60 minutes a day after school saw substantial...
Read more on Celebrity Balla
 
14 percent Britons have partners they have never met!
London, Sep 29 (IANS) In an indication of how much the virtual world has become part of our real lives, a survey has found that one in seven people in Britain has relationship with people he/she has only interacted...
Read more on Celebrity Balla