Big news in the world of cryptocurrency today, coming from more than one SEC office.
Industry Pros Avoiding Crypto
Cryptocurrency is hot in the MLM world right now, with the appearance of easy financial wins with low risk. However, cautious industry insiders are wary of crypto for two big reasons.
1. There’s been quite a bit of recent attention on MLM’s customer requirements (so as not to be considered Ponzi schemes). MLM’s with money as the product offering have a much more challenging uphill battle to prove they’re acquiring customers and not just funneling money.
2. Cryptocurrency is still new and unregulated. Some people take the gray areas as “wiggle room,” but the same wiggle room that can potentially yield a good profit now leaves too much room for legal action or jail time later. Experienced network marketers are staying clear of crypto MLM’s.
The SEC office declared today that crypto does need to be registered with the SEC. According to Stephanie Avakian, Co-Director of the SEC’s Enforcement Division, “The innovative technology behind these virtual transactions does not exempt securities offerings and trading platforms from the regulatory framework designed to protect investors and the integrity of the markets.”
To date, there isn’t a single crypto MLM registered with the SEC. That means that, as of today, every crypto MLM is potentially out of compliance with the SEC.
Even Worse News for Crypto MLM’s
Today, the SEC’s Office of Investor Education and Advocacy issued an investor bulletin educating investors about ICOs.
1. Virtual coins or tokens may be securities and are subject to the federal securities laws.
2. The federal securities laws provide disclosure requirements and other important protections of which investors should be aware.
How to Protect Yourself
The SEC also shared a list of warning signs. From the U.S. Securities and Exchange Commission’s Investor.gov page:
Be careful if you spot any of these potential warning signs of investment fraud:
1. “Guaranteed” high investment returns. There is no such thing as guaranteed high investment returns. Be wary of anyone who promises that you will receive a high rate of return on your investment, with little or no risk.
2. Unsolicited offers. An unsolicited sales pitch may be part of a fraudulent investment scheme. Exercise extreme caution if you receive an unsolicited communication—meaning you didn’t ask for it and don’t know the sender—about an investment opportunity.
3. Sounds too good to be true. If the investment sounds too good to be true, it probably is. Remember that investments providing higher returns typically involve more risk.
4. Pressure to buy RIGHT NOW. Fraudsters may try to create a false sense of urgency to get in on the investment. Take your time researching an investment opportunity before handing over your money.
5. Unlicensed sellers. Many fraudulent investment schemes involve unlicensed individuals or unregistered firms. Check license and registration status on Investor.gov.
6. No net worth or income requirements. The federal securities laws require securities offerings to be registered with the SEC unless an exemption from registration applies. Many registration exemptions require that investors are accredited investors; some others have investment limits. Be highly suspicious of private (i.e., unregistered) investment opportunities that do not ask about your net worth or income or whether investment limits apply.
Looks like those gray areas the crypto MLM’s are taking advantage of just got a whole lot less gray.
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