CROMWELL, Conn. (WTNH) – The Better Business Bureau wants Connecticut residents to be aware of the risks involved in using the virtual currency known as Bitcoin.
Bitcoin is a digital form of money that is not controlled or backed by any central government or central bank. This digital money can be bought or sold through virtual currency exchanges and used to purchase goods or services. The paperless currency’s value fluctuates wildly, making it dangerous for merchants who accept it, as well as consumers who purchase bitcoins as an investment.
Some common concerns and issues you should consider when approached with potential investment opportunities:
Virtual currency is subject to minimal regulation, susceptible to cyber-attacks and there may be no recourse should the virtual currency disappear.
Virtual currency accounts are not insured by the Federal Deposit Insurance Corporation (FDIC), which insures bank deposits up to $250,000.
Investments tied to virtual currency may be unsuitable for most investors due to their volatility.
Investors in virtual currency will be highly reliant upon unregulated companies that may lack appropriate internal controls and may be more susceptible to fraud and theft than regulated financial institutions.
Investors will have to rely upon the strength of their own computer security systems, as well as security systems provided by third parties, to protect their digital wallets from theft.
Con artists are banking on the popularity of virtual currencies to take advantage of people with fake investment swindles.
The U.S. Securities and Exchange Commission (SEC) took action against a Texas man who advertised a Bitcoin “investment opportunity” in an online Bitcoin forum. He convinced victims to give him their Bitcoin holdings in exchange for the promise of receiving even more Bitcoins in the future, plus 7% interest per week. The scam was exposed when the promoter was not able to pay the promised returns.
What to Do
It pays to do your homework before you make any decisions with your money. Keep in mind the following tips when considering any type of investment opportunity:
Contact Connecticut Better Business Bureau, at 860-740-4500, to see if any complaints have been filed against the venture’s promoters or principals.
Ask for written information on the investment product and the business. Such information, including financial data on the company and the risks involved in the investment, is contained in a prospectus. Read it carefully.
Don’t take everything you hear or read at face value. Ask questions. If you need help in evaluating the investment, go to someone independent whom you can trust such as an attorney or an accountant.
Steer clear of investments touted with no downside or risk.
Report Suspected Fraud
If you suspect that a person offering you an investment opportunity is fraudulent, contact the Department of Banking, at 1-800-831-7225, or online at http://www.ct.gov/dob.