SALT LAKE CITY — A popular virtual currency has been targeted as the greatest potential threat to investors in the New Year.
The Utah Division of Securities is warning investors that cryptocurrencies such as Bitcoin are risky investments that have been used as vehicles for fraud. The division Friday released information to warn consumers about schemes that may target individuals’ retirement savings in the near future.
Cryptocurrencies are a medium of exchange created and stored electronically using blockchain technology, a distributed public database that keeps a permanent record of digital transactions, a news release stated. Common cryptocurrencies include Bitcoin, Ethereum and Litecoin. But unlike traditional currency, these alternatives have no physical form and typically are not backed by tangible assets, said Keith Woodwell, director of the Utah Division of Securities.
Consumers should be aware that these investments are not insured or controlled by a central bank or other governmental authority, cannot always be exchanged for other commodities and are subject to little or no regulation, he noted. With Utah’s growing economy and consumer spending, the Beehive State could be targeted for cryptocurrency pitches, he said.
“Utah’s reputation as a technically savvy and connected state makes our population ripe for cryptocurrency fraud,” he said. “While it’s a compliment to our population for being plugged into what’s trending, internet hype can lead to rash decisions.”
He noted that because Bitcoin has seen a sharp increase in value over the past year, going from approximately $900 to nearly $17,000 currently, investors may be ripe for fraud as they try to get into the cryptocurrency market.
“Things that tend to go up very fast also tend to come down very fast,” Woodwell said. “We see a lot of fraudsters capitalizing on this fad that so many people are paying attention to. (Scammers) are using that greed and the little bit of knowledge that people have to offer bogus investments.”
He said fraudsters are devising Ponzi schemes using cryptocurrencies, leaving some victims in a financial lurch.
“They’re using money from new investors to line their own pockets and pay off any old investors to create the illusion that there’s a successful business investment happening, but there is nothing behind it but smoke and mirrors,” Woodwell said. Some scams also involved multi-level marketing, he added, which can also lead to financial loss for unsuspecting consumers.
He advised investors to be vigilant in researching investments involving virtual currencies to avoid becoming fraud victims. If …read more
Source:: Deseret News – Business News