Unless you’ve been living under a stack of savings bonds from the 1980s, you’ve seen news of the Bitcoin mania that’s swept the financial world. As new entrants flood the market, speculation abounds that Bitcoin and other virtual currencies will usher in a new paradigm for the exchange of monetary value uncoupled from government backing—and that those currencies will eventually displace more traditional financial channels and intermediaries. That enthusiasm for cutting-edge currencies has been rivaled only by the frequent reports of fraud and abuse besetting those drawn to the new technology. Regulators including the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have sounded the alarm that the virtual currency frontier is a digital Wild West.
What’s most notable about the cloud over cryptocurrency, however, may be just how old-fashioned these threats are. The SEC has alleged that purported initial coin offerings (ICOs) from REcoin and Diamond Reserve Club were simply fancy fraud schemes based on empty promises. The CFTC has brought actions against other purported cryptocurrency investment opportunities, charging that they were little more than Ponzi schemes or similar deceptions. And last month a New York City man was held up at gunpoint in a plot to steal his digital wallet, which contained $1.8 million in Ether.
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