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July 23, 2013 at 08:59 AM
The Securities and Exchange Commission is warning investors to watch out for scams using virtual currencies, namely Bitcoin.
Just as the SEC on Tuesday charged a Texas man and his company with defrauding investors in a Ponzi scheme involving Bitcoin, the SEC’s Office of Investor Education and Advocacy released an alert warning investors about fraudulent investment schemes that may involve Bitcoin and other virtual currencies.
As the SEC’s alert states, virtual currencies, such as Bitcoin, have recently become popular. These schemes, the agency states, “often promise high returns for getting in on the ground floor of a growing Internet phenomenon.”
These currencies “may be traded on online exchanges for conventional currencies, including the U.S. dollar, or used to purchase goods or services, usually online,” the SEC says.
The “rising use of virtual currencies in the global marketplace may entice fraudsters to lure investors into Ponzi and other schemes in which these currencies are used to facilitate fraudulent, or simply fabricated, investments or transactions,” the agency says. “The fraud may also involve an unregistered offering or trading platform.”
Virtual currencies are attractive to fraudsters, the SEC says, because transactions in virtual currencies have more privacy and less regulatory oversight than transactions in conventional currencies.
