Bitcoin is a virtual currency that may be traded on online exchanges for conventional currencies, including the U.S. dollar, or used to purchase goods and services online. Bitcoin has no single administrator or central authority or repository. For federal tax purposes, virtual currency (including Bitcoin) is treated as property.
Silver Law Group represents investors in all types of investment fraud cases. If you have losses of $100,000 or more related to Bitcoin or other cryptocurrency, please contact us to discuss potential options for recovery.
In recent years, Bitcoin has emerged as a more widely-accepted form of currency (online retailers such as Amazon.com, Overstock.com, and Zappos.com accept payment in Bitcoin). It has rapidly grown in popularity amongst investors looking for an alternative to traditional stocks-and-bonds investments. Unfortunately, it has also emerged as an investment product that can be abused and associated in criminal activity.
In 2013, the U.S. Securities and Exchange Commission charged a Texas man (who identified himself online as “pirateat40”) and his company with fraud involving an alleged Bitcoin Ponzi scheme. In February 2014, the Tokyo-based Mt. Gox, one of the largest Bitcoin exchanges in the world, abruptly ceased its operations amidst criticisms that it was fostering illegal transactions conducted by numerous drug dealers and white collar criminals. Mt. Gox subsequently filed for bankruptcy in Japan and in the United States, leaving the investors whose Bitcoin were housed at Mt. Gox without access to their property and without the ability to reap any value from their Bitcoin investments.
According to a 2014 advisory issued by the Financial Industry Regulatory Authority (FINRA), the following are among the biggest known risks to buying, selling, and using Bitcoin:
- Platforms that buy and sell bitcoins can be hacked, and some have failed. In addition, like the platforms themselves, digital wallets can be hacked. As a result, consumers can—and have—lost money.
- Bitcoin transactions can be subject to fraud and theft. For example, a fraudster could pose as a Bitcoin exchange, Bitcoin intermediary or trader in an effort to lure you to send money, which is then stolen.
- Unlike US banks and credit unions that provide certain guarantees of safety to depositors, there are no such safeguards provided to digital wallets.
- Bitcoin payments are irreversible. Once you complete a transaction, it cannot be reversed. Purchases can be refunded, but that depends solely on the willingness of the establishment to do so.
FINRA has cautioned investors that like any speculative alternative investment, profits or losses are virtually impossible to predict. In light of the wild fluctuation of the value of Bitcoin, investing in Bitcoin is extremely risky.
In August 2014, on behalf of a group of investors victimized by an alleged Ponzi scheme, Silver Law Group filed a federal court lawsuit against the Texas-based entity and individual already under heavy scrutiny from the SEC.
In 2022, the SEC and CFTC have promulgated additional rules to help regulate crypto currency.
If you have been asked to pre-pay taxes or other fees to get your money out of a Bitcoin or cryptocurrency-related investment, it is likely that you invested in a fraudulent scheme that may be overseas. Unfortunately, we do not believe we can help such investors.
As the popularity of Bitcoin and other cryptocurrencies has grown, we have seen a significant amount of fraud associated with it. Commonly we hear from investors who deposited money into a purported crypto exchange, mining pool, or trading platform where fraudsters claim to deliver exponential returns. Unfortunately, when investors try to withdraw their money, they are asked to deposit more funds to cover taxes, administrative costs, anti-money laundering fees, or other fees. If the investor pays the fees, they receive nothing, and are asked to pay even more money. Legitimate investments do not require additional fees be paid to access profits or principal.
The SEC has filed a number of enforcement actions against these types of scammers.
Amongst other claims, Silver Law Group represents victims of crypto Ponzi schemes, cell phone hacking cases and in claims against the financial advisors, promoters, and others whose actions violate the federal securities laws.