The explosion of world-wide intrigue into Bitcoin and Block Chain Technology (which is one and the same) has fascinated us and kicked off a feeding frenzy for investment promoters and investors alike. The price of a Bitcoin valued in U.S. dollars keeps on rising, fast and furious, with some deep but short lived pullbacks. On a daily basis a supposed financial expert opines on the perils of a Bitcoin bubble, while another argues that the price will rise to $100,000 or even far higher in the not too distant future (this week the price fluctuated between $10,000 and over 19,000). But that’s okay, that’s what markets are made of: bulls and bears. Unfortunately, since the beginning of financial markets, con artists are pervade the financial markets, seeking easy money with smooth talk, stories of easy and fast profits, and representations that push investors’ greed button while minimizing any risk concerns. Con artists are always present, however their numbers grow exponentially during time of a new discovery or invention such as tulip-mania, the gold rush, dot com bubble, creation of instruments of mass destruction (CDOs, CDS, derivative products), and now, block chain technology.
This article is geared simply toward reminding investors think before they invest; to know what they do not know; not to blindly trust a promoter of an investment opportunity; and to hire an investment professional who is free of conflicts of interest to advise and conduct due diligence on the investment opportunity before investing your money. Investment promoters often push investors to act fast or lose a great opportunity, and that is the first sign (red flag) indicating you may want to pass on this one.
Cryptocurrencies and ICOs are growing at astonishing rates. According to a Forbes article in September 2007, Initial Coin Offerings (ICOs) raised nearly $2.3 billion in ICOs, with the large majority of that taking place in the first half of 2017. And it is just beginning. Many of the promoters of these investments may have good intentions, some may provide great returns, but many will fail, and some were never real to begin with. It is possible to determine between the real opportunities and the scams. But it’s on you to protect yourself.
Government regulators always play catch up with the con artists, and it appears that the Securities and Exchange Commission (SEC) is catching on to the scams and taking action. On December 4, the SEC announced it obtained an emergency asset freeze to halt a fast-moving Initial Coin Offering (ICO) fraud that raised up to $15 million from thousands of investors since August by falsely promising a 13-fold profit in less than a month. The SEC filed charges against a Quebec securities law violator, Dominic Lacroix, and his company, PlexCorps. The Commission’s complaint, filed in federal court in Brooklyn, New York, alleges that Lacroix and PlexCorps marketed and sold securities called PlexCoin on the internet to investors in the U.S. and elsewhere, claiming that investments in PlexCoin would yield a 1,354 percent profit in less than 29 days. The SEC also charged Lacroix’s partner, Sabrina Paradis-Royer, in connection with the scheme.
These charges were the first by the SEC’s new Cyber Unit, which was created in September to focus the SEC Enforcement Division’s cyber-related expertise on misconduct involving distributed ledger technology and initial coin offerings, the spread of false information through electronic and social media, hacking and threats to trading platforms. “This first Cyber Unit case hits all of the characteristics of a full-fledged cyber scam and is exactly the kind of misconduct the unit will be pursuing,” said Robert Cohen, Chief of the Cyber Unit. “We acted quickly to protect retail investors from this initial coin offering’s false promises.”
It is great that the SEC has stepped into stop fraudulent operators, but remember that by the time the SEC jumps in, the investors have lost most if not all of their money.
So, what do you do if you want to invest in an ICO? Simple, give us a call at Wittenberg Law. We have vetted (i.e,, conducted due diligence on) countless investment opportunities for our clients, and we have the sophistication to verify or expose representations made by investment promoters. We know that investors typically do not want to pay an attorney to represent them in making the investment, but we also know that many thousands of investors each and every year with they had done so because they lost most or all of their money in an investment.
What do you do if you invested in an ICO and you are having a difficult time? Call us. We can help.
Confidential and free consultations. (310) 295-2010. Ask for Jeffrey.