HOME     MENU     SEARCH     NEWSLETTER    
NEWS & INFORMATION FOR TECHNOLOGY PURCHASERS. UPDATED 14 MINUTES AGO.
You are here: Home / Cloud Computing / SEC Warns About Dangers of Bitcoins
SEC Warns of Fraud, Other Risks with Bitcoins
SEC Warns of Fraud, Other Risks with Bitcoins
By Barry Levine / NewsFactor Network Like this on Facebook Tweet this Link thison Linkedin Link this on Google Plus
PUBLISHED:
MAY
08
2014



The U.S. Securities and Exchange Commission weighed in on bitcoins Wednesday. In an Investor Alert, it said the virtual currency "has the potential to give rise both to frauds and high-risk investment opportunities."

This new alert complements an earlier one from the federal agency, entitled "Ponzi Schemes Using Virtual Currencies." The SEC also referenced warning alerts on bitcoin from the Financial Industry Regulatory Authority and the North American Securities Administrators Association.

In this alert, the SEC assembled a sizable list of issues. It pointed out that "innovations and new technologies are often used by fraudsters to perpetrate fraudulent investment schemes."

Law Enforcement Challenges

Warning signs of such investment fraud, the SEC said, include a "guaranteed" high investment return, unsolicited Relevant Products/Services pitches, unlicensed sellers, no net worth or income requirements, pressure to buy immediately, and a deal that "sounds too good to be true."

"Using bitcoin may limit your recovery in the event of fraud or theft," the SEC warned. The reasons, the agency said, include the fact that third-party wallet services, payment processors and bitcoin exchanges may be unregulated or even operating illegally.

Additionally, law enforcement after a bitcoin-related crime could face a number of challenges. This includes the difficulty in tracing money because traditional financial institutions are not involved, the international scope, no central authority for the decentralized currency, and the problems that law enforcement officials may have in seizing or freezing bitcoins.

And that's only part of the SEC's issues with bitcoins. The currency also has unique risks, the SEC said, including no governmental insurance for accounts holding bitcoins as there is in traditional bank accounts. There's also a history of volatility in the exchange rate, including a drop in a single day of more than 50 percent.

Plus: Governments of any kind might restrict bitcoin use, and the currency, being new, does not have "an established track record of credibility and trust."

FEC, Defense, Wall Street

But not all U.S. federal agencies have the same approach as the SEC. On Thursday, for instance, the Federal Election Commission -- by a unanimous vote -- gave its approval to the use of bitcoins in donations to political committees.

The Defense Department is reportedly looking at bitcoins to see if they pose a threat to national security. A key concern is the anonymity, because it raises the possibility of terrorist cells transmitting money without security officials being able to trace it.

On Wall Street, Bloomberg News reported Wednesday, such financial services as payment system FIS are investigating whether it can adapt bitcoin's ability to securely move funds on existing networks.

In China on Thursday, two banks -- China Guangfa Bank and Shanghai Pudong Development Bank -- said Thursday they would not allow their customers to use their bank accounts for bitcoin trading.

And, earlier this week, researchers at the security training Sans Institute reported that a low-end, Net-enabled digital video recorder had been infected with malware that secretly mined bitcoins. There have previously been reports that other devices, including Android smartphones and Linksys routers, had similarly been compromised with bitcoin-mining malware.

Read more on: Bitcoin, SEC, Fraud, Virtual Currency
Tell Us What You Think
Comment:

Name:

Like Us on FacebookFollow Us on Twitter
MORE IN CLOUD COMPUTING

NETWORK SECURITY SPOTLIGHT
It could be the biggest Apple hack ever. More than 225,000 valid iPhone accounts have been compromised and thousands of certificates, private keys, and purchasing receipts stolen.

ENTERPRISE HARDWARE SPOTLIGHT
Is Windows 10 killing the PC market? Something is going on. IDC predicts worldwide PC shipments will fall 8.7 percent in 2015 -- and shipments aren’t expected to stabilize until 2017.

MOBILE TECHNOLOGY SPOTLIGHT
Set to be officially unveiled Thursday at the IFA 2015 consumer electronics show in Berlin, Samsung's new Gear S2 smart watch will let users make quick voice calls without having to link to nearby smartphones.

NEWSFACTOR.COM
NEWSFACTOR NETWORK SITES
NEWSFACTOR SERVICES
© Copyright 2015 NewsFactor Network, Inc. All rights reserved. Member of Accuserve Ad Network.