The Texas State Securities Board (TSSB) has unveiled a report, which highlights the risks associated with investing in cryptocurrency in Texas, which includes fraud and money laundering.
Investing in anything has its risks and gains. So far, numerous people have been victimized by Ponzi schemes and investment frauds, with millions of money being lost to these frauds. At this point, even reputable financial institutions have become involved in illegal activities involving cryptocurrency.
Promises of no risk, all rewards
The TSSB has begun an investigation that involves 32 cryptocurrency investment exchanges, which will last for about four weeks. One of the things that were revealed in the investigation was that two-thirds of these exchanges could not provide a physical address for their investors to visit should problems arise. The board warned investors that this could become a huge problem should the exchange becomes involved in fraud, as it will make it difficult to begin legal proceedings. Lawmakers will be unable to physically serve summons and notices, as well as legal correspondence.
Another thing that was discovered was the fact that five out of the 32 failed to disclose any risks in investing with them. There was also no mention of the risk for the possible cyber hack. The only thing these crypto exchanges disclosed was that they could provide gains of up to 40% per month.
Deception in cryptocurrency
The TSSB warned investors to be wary of the information provided by the websites, as it could be misguiding and easily manipulated.
As explained in their report:
Charming portraits and lengthy profiles may convey a sense of comfort and security, but virtually anyone from anywhere may be lurking behind the flashy graphics.
TSSB used LeadInvest, a crypto investment website, as an example. They had a page dedicated to their management team, but it was found out that the photos used were from stock photographs and are of people who had no affiliation with their company. This lead to the TSSB serving them an order to cease.
Texas to crack down on unauthorized crypto traders
None of the 32 exchanges in TSSB’s report were authorized to trade securities in Texas. Additionally, these entities were hoping to bait investors by using Bitcoin’s sudden price rise in 2017. However, they never even offered anything Bitcoin-related in their investment options.
According to the TSSB, any unauthorized trading will result in “administrative, civil, or criminal repercussions.”
While rules and regulations regarding cryptocurrency are different to that of traditional assets and liabilities, there still some things that they both have in common. One of it is that potential investors need to be thorough in researching before throwing their hard-earned money in an investment.