Cryptocurrency is an asset that is gaining increasing attention from investors. As a digital asset, cryptocurrency tokens can be used to buy products, services, and conventional currency through online exchanges. Yet the cryptocurrency market is volatile and the environment is ripe for fraudsters. Many sophisticated retail investors have lost money in cryptocurrency scams.
If you’re one of them, contact a cryptocurrency fraud lawyer at Silver Law Group. Our attorneys represent investors who have been the victims of various types of fraud and scams, and we have an extensive track record of success.
Cryptocurrency is a digital or virtual asset, usually referred to as a token. Bitcoin was one of the first cryptocurrencies to become popular but there are numerous types of crypto available with different functions and qualities. Each currency operates on a secure network of computers called a node.
Transactions are encrypted to be anonymous and recorded using blockchain technology, a decentralized ledger system which prevents the altering or deletion of information once it is added. Users store their cryptocurrency in digital wallets and trade it on specialized exchanges.
Cryptocurrency scams can be similar to scams fraudsters run using conventional securities. Examples include Ponzi schemes, Pump and Dump operations, misstatements or omissions in public statements, and claims for unregistered securities. Silver Law Group attorneys have extensive experience representing investors who lost money due to these traditional types of fraud.
We are also on the cutting edge of legal actions to protect investors from other types of crypto fraud. For example, there have been cases of fraudulent initial coin offerings (ICOs). The promoters of these scams induce investors to get in early with a new crypto offering, but the tokens do not exist or are not properly registered securities. A similar scam lures investors into non-existent crypto mining operations.
One of the appeals of crypto is that secure blockchain technology allows owners control of the asset with limited oversight from government agencies or banks. However, the exchanges where crypto is traded are vulnerable to security breaches which can result in financial losses. SIM card hacks can give fraudsters access to an investor’s digital wallet and other personal information that they can use to steal money.
U.S. law on crypto is still developing, but currently, the Securities and Exchange Commission (SEC) regulates some cryptocurrency as a securities if it meets the standard of an investment contract. An investment contract requires an investment of money in a common enterprise with the expectation of profit relying on others’ efforts.
When a particular form of crypto meets the investment contract definition, scammed investors can rely on the securities fraud class action process to recoup their lost funds.
For smaller investors and even some institutional investors, class action lawsuits are an efficient way to seek compensation for investment fraud. The defrauded investors join in a single lawsuit but can combine the knowledge gained through their individual experiences to support their legal claim. Litigation costs are shared among all the participants, though a settlement often requires the fraudsters to pay the plaintiffs’ legal costs. The proceeds of the lawsuit are shared among participants on a pro rata basis.
Cryptocurrency is a developing industry, and regulation is still spotty. Fraudsters are rampant, and many investors get scammed through no fault of their own.
If you lost money in crypto and you believe you were the victim of a scam, contact Silver Law Group right away. Our cryptocurrency fraud lawyers will explore your legal options – including class actions – and help you to decide how to proceed.