US SEC & CFTC: Beware of Fraudulent Bitcoin Investment Websites

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The United States Security and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) recently published a warning for investors against fraudulent Bitcoin investment websites.

This recent warning follows a trend of scams noticed by the regulatory agencies, which leave unsuspecting customers at the mercy of fraudsters. In the publication, both bodies presented mechanisms used by the so-called investment advisers to lure unsuspecting victims into these fraudulent investment schemes.

Bitcoin Scam

Spread of Fake Bitcoin Investment Websites Worry US Regulators

The Office of Investor Education and Advocacy (OIEA) and the Customer Education and Outreach, both of the SEC and CFTC respectively, published an investors’ alert on April 24, warning against fraudulent Bitcoin websites and investment advisers. According to the SEC and the CFTC, fake virtual currency investment advisers were on the prowl to milk unsuspecting investors of their money.

Per the regulatory bodies’ observations, scammers laid out juicy deals to investors, such as high investment returns and less risk. As a means to protect investors, the SEC and the CFTC further gave a list of red flags that would aid in spotting dubious Bitcoin investment schemes.

One of such signs was the use of bogus and incomprehensible terms. Scammers use lots of jargons to confuse intending investors, thereby making it difficult for customers to understand what the are getting into. Also, spelling and grammatical errors could strongly indicate that the business is a scam.

Another red flag pointed out by the U.S. regulatory bodies is the promise of guaranteed high returns on Bitcoin investments. The agencies opined that investments are usually prone to risks and terms such as “guaranteed profit”, “risk-free”, and any such alluring languages show signs of fraud.

The warning further stated that if the investment is “too good to be true” and there is pressure to buy, then investors should beware. Other pointers given included unlicensed sellers and unsolicited sales. Also, the alert states that fraudsters disappear and become unreachable after collecting investors’ funds.

Both agencies, however, caution investors to take time to verify every information and conduct proper investigation before investing.

SEC Continues to Clamp Down on Erring Cryptocurrency Firms

Apart from the warning from the SEC and the CFTC, the SEC earlier probed investment advisers in the cryptocurrency sector for misconduct. The U.S. regulatory body focused its beam on price manipulation, scammers, and virtual currency custody.

The regulator’s concerns and scrutiny stem from repeated cases of stolen funds due to inadequate security. Usually, investment advisers store assets in banks or brokerage firms. However, the case is different for digital currency assets, as these are stored in wallets. In terms of cryptocurrency custody, very few offer trustworthy custodial services. As such, virtual currency wallets and exchanges fall prey to hackers which results in stolen coins.

In the face of the agency’s scrutiny, however, investment advisers are confused when it comes to reporting virtual currency investment. This is because there are no clear-cut guidelines from the SEC for advisers to follow.

In its quest to sanitize the ICO space, the SEC has also sanctioned celebrities who have endorsed scam token offerings. Floyd Mayweather and DJ Khaled incurred fines for their role in promoting the Centra Tech ICO scam.

However, the Commission is not without its critics who say the SEC’s approach to regulations will stifle the growth of the crypto industry in the U.S. Even SEC Commissioner Hester Peirce has urged the Commission on several occasions to adopt a more nuanced style of virtual currency oversight.

Earlier in April 2019, the SEC began showing signs of heeding to some of these calls. The SEC announced that it was looking to hire a cryptocurrency specialist, a first for the regulatory body and it also published a cryptocurrency guidance letter.


Osato is a Bitcoin enthusiast who can often be found providing insight on the latest Bitcoin-related news. When he isn't closely monitoring stories in the industry, he is either attempting to beat his scrabble high score or internally debating some existential dilemma. Contact Osato@Blockonomi.com

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