On January 4th, the same day I posted about a recent FINRA Investor Alert regarding cryptocurrency, there was a new press release from the North American Securities Administrators Association (NASAA) with further guidance on the same topic. NASAA’s analysis and warning amounts to this: Initial Coin Offerings (“ICOs”), and all other investment products related to cryptocurrency or the blockchain, pose a threat to investors.
“A NASAA survey of state and provincial securities regulators shows 94 percent believe there is a ‘high risk of fraud’ involving cryptocurrencies. Regulators also were unanimous in their view that more regulation is needed for cryptocurrency to provide greater investor protection.”
The same day, the SEC made a public statement from Chairman Jay Clayton and Commissioners Kara M. Stein and Michael S. Piwowar, in wholehearted agreement with NASAA: “The NASAA release also reminds investors that when they are offered and sold securities they are entitled to the benefits of state and federal securities laws, and that sellers and other market participants must follow these laws. Unfortunately, it is clear that many promoters of ICOs and others participating in the cryptocurrency – related investment markets are not following these laws. The SEC and state securities regulators are pursuing violations, but we again caution you that, if you lose money, there is a substantial risk that our efforts will not result in a recovery of your investment.”
“High risk of fraud”? That’s a polite understatement. The conditions in this cryptocurrency market are the perfect conditions for bad actors to harm investors and cause investment losses. How? Fraud through market manipulation. Fraud through technical manipulation. Fraud through plain theft. Adverse terms and conditions on a clickthrough agreement. Technical failure, incompetence, malfeasance on the part of the provider. Cyberthreats from third parties online, vandals or burglars. Misrepresentations of the real possibility that cryptocurrency is an object of temporary interest, the bubble will pop, and prices will drop.
And, of course, bad actor conduct includes flawed recommendations by financial advisors to jump in and buy these new, complicated products related to cryptocurrency. If your portfolio contains investments that, on closer examination, are not plausible or not understandable, that’s one of the ten red flags of financial fraud.
As a securities attorney, I represent investors nationwide who have lost money due to the conduct of a financial professional or a defective investment product.
The Investor Defenders at Samuels Yoelin Kantor LLP help investors get their money back from brokerage fraud, fraudulent investments, elder financial abuse, and other situations. Our specialized investment litigation practice combines familiarity with complex financial modeling, experience with specialized FINRA arbitration rules and securities laws, and empathy for our clients whose financial losses have become personal.
If you have concerns about how your money is being handled by your financial professional, or if your broker has stopped returning your calls, contact me for a free, confidential consultation at 1-800-647-8130.
Darlene Pasieczny’s practice at Samuels Yoelin Kantor focuses on all stages of corporate and securities law issues, securities litigation and FINRA arbitration, fiduciary litigation in trust and estate disputes, and complex civil litigation. Darlene’s practice also includes representing investors nationwide in investment disputes. To read more about her cases and the results she gets, visit our Investor Defenders site.