The U.S. Securities and Exchange Commission (SEC) has issued a new warning about individual retirement account (IRA) fraud and cryptocurrencies.
Turning to Cryptocurrencies
As people think more about their retirement funds, many savers are considering self-directed IRAs. In most cases, these types of savings are held up in real estate and precious metals. However, with interest in digital currencies rising, these are now becoming an alternative.
As a result, the SEC has issued a new warning regarding the potential fraud risks. The agency notes that investors “should be mindful” that self-directed IRAs come with risks, including “fraudulent schemes, high fees, and volatile performance.”
It goes on to note the possible risk associated with digital currencies, adding:
Fraudsters may use the allure associated with ICOs and other digital assets to entice self-directed IRA investors with the promise of high returns.
Notably, it concedes that cryptocurrencies “may provide fair and lawful investment opportunities.” However, these “may also be conducted without SEC registration.”
In a report from CNBC, Lori Schock, director of the SEC’s Office of Investor Education and Advocacy, said:
Now that some self-directed IRAs include digital assets — cryptocurrencies, coins and tokens, such as those offered in so-called initial coin offerings — we think it is important to alert investors about the potential risks and fraud involved with these kinds of investments that may not be registered.
Scammers Use ICOs
One of the issues affecting digital currencies is their use in scams. According to a report published yesterday, $100 million has been lost to initial coin offering (ICO) exit scams.
Additionally, all the projects’ tokens have nearly lost all of their value. An SEC official explained that even though the projects are raising lots of money, they aren’t complying with regulations. Earlier this week, it was reported that a Finnish man had been scammed out of $34 million worth of Bitcoin.
For many people, particularly those new to the industry, putting money into a crypto project may seem the ideal route to take. Not only that, but those thinking about their retirement could see an investment in cryptocurrencies as the right one.
However, it goes without saying that research needs to be done first. It doesn’t take long to find out whether a company is legit or not. Unfortunately, it’s not as easy to get a person’s money back once they invest in a company that turns out to be a fraud.
Do you think the SEC was right in issuing the new warning about crypto IRAs? Let us know in the comments below.
Images courtesy of Shutterstock