Cryptocurrency Scams Take Center Stage As Investors Get Torched.

Chicago-based Stoltmann Law Offices is representing clients who’ve suffered losses from advisors who sold clients cryptocurrencies that have lost value and investors who have lost funds due to identity theft, fraud, and hacking involving their crypto-currency accounts.  One of the biggest stories in finance, has been the epic crash of cryptocurrencies, which were pitched as profitable alternatives to cash, stocks, and bonds. “Cryptos” were sold as sure-fire hedges against inflation, but as inflation continued to rise, digital currencies kept heading south in a big way.

Worse yet, the overselling of cryptos has been tied to $1 billion losses in outright scams involving more than 46,000 people, according to the Federal Trade Commission (FTC). As with most swindles, investors were enticed with the promise of quick wealth with no risk. The “Crypto Crash” goes beyond the perils of high inflation and supply chain issues, though. Many observers believe the promise of crypto wealth is actually a Ponzi scheme that’s not linked to any underlying legitimate investment and is fueled by a stream of new investors being duped by the illusion of instant wealth.

The decline in some cryptos has been devastating. According to Robert Reich in The Guardian: “TerraUSD, a `stablecoin,” – a system that was supposed to perform a lot like a conventional bank account, but was backed only by a cryptocurrency called Luna – collapsed, losing 97% of its value in just 24 hours, apparently destroying some investors’ life savings.”

Reich added “before the crypto crash, the value of digital currencies kept rising by attracting an ever-growing number of investors and some big Wall Street money, along with celebrity endorsements. But again, all Ponzi scams topple eventually. And it looks like crypto is now toppling.”

Note that there are no standards for crypto risk management, transparency, or capital reserves. Also, cryptos are not covered by deposit insurance or any other guarantees. Further, in the event your crypto exchange goes into bankruptcy, your account will be frozen and sucked into the bankruptcy estate.

Have you been sold digital currencies by broker-advisors that have lost value? Brokers must carefully vet all trades and investments with you to ensure that the vehicles they are selling are legitimate and meet your financial goals and risk tolerance. If you choose to take on more risk, they must explain in clear detail the downside of such an investment. Virtually all brokerage firms forbid their brokers from recommending cryptocurrency investments, so if you were sold anything crypto-related by your financial advisor, that is a huge red flag and the brokerage firm could be liable.

Firms are also legally required by FINRA to monitor and supervise what their brokers are selling – their investments must be vetted and authorized by the firms – and have an obligation to investors to fully reveal true risk and return information about the vehicles sold. Investors can file FINRA arbitration complaints if these rules are broken. You can often avoid rogue broker-advisors by checking their backgrounds through BrokerCheck.

If you invested with a broker-advisor and lost money as a result, you may have a claim to pursue through FINRA Arbitration. Please contact Stoltmann Law Offices, P.C. at 312-332-4200 for a free, no obligation consultation with a securities attorney. Stoltmann Law Offices is a contingency fee law firm which means we do not get paid until you do!