Skip to content

Compliance Building

Doug Cornelius on compliance for private equity real estate

Menu
  • Home
  • About
    • About
    • About Doug
    • About This Website
    • Why I Blog
    • Speaking Engagements
    • Contact
    • Publications
  • Archives
    • Topic Archive
    • Book Reviews
    • Most Popular
  • Subscribe
  • Disclaimers
    • Disclaimers
    • Policies and Procedures
    • Use of Site Content
    • Comments
    • FTC Disclosure
Menu

The SEC Says Be Wary of Bitcoin

Posted on May 13, 2014 by Doug Cornelius
Print Friendly, PDF & Email

bitcoin

Bitcoin has been the Dutch Tulips of investment for a few years. So of course that means the fraudsters have latched on. The Securities and Exchange Commission has piled on and issued an Investor Alert: Bitcoin and Other Virtual Currency-Related Investments.

This is the second investor alert from the SEC on Bitcoin. The first was part of an enforcement action against an alleged Ponzi scheme.

It’s not that Bitcoin is inherently illegal. It actually has an interesting approach on funds transfers. Transfers are free of transaction costs. That’s in sharp contrast to the swipe fees charged by Visa, Mastercard, and the other credit card companies.

One of the current problems with bitcoin is that the value has fluctuating wildly. That’s not what you want in a currency. You want to know that a gallon of gas costs about $4 today and will be about $4 next month. You don’t want the uncertainty that it could be $2 of $8 next month. That turns bitcoin from a currency into an investment.

The IRS recently issued guidance that it will treat Bitcoin and other virtual currencies as property for federal tax purposes. As a result, general tax principles that apply to property transactions apply to transactions using bitcoin.

Bitcoin fraud schemes look like other fraud schemes. The fraudsters use the lure of high returns in a lightly regulated asset. The growth chart of value in Bitcoin is an irresistible lure. Don’t forget to look for the red flags like “guaranteed returns” and “no risk” opportunities. If it sounds too good to be true, it probably is not true.

References:

  • Investor Alert: Bitcoin and Other Virtual Currency-Related Investments
  • Investor Alert: Ponzi schemes Using virtual Currencies (.pdf)

Share this:

  • Print (Opens in new window) Print
  • Share on Facebook (Opens in new window) Facebook
  • Share on LinkedIn (Opens in new window) LinkedIn
  • Share on X (Opens in new window) X
  • Email a link to a friend (Opens in new window) Email

Leave a ReplyCancel reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Search for Stuff

Recent Stories

  • No Insider Trading Too Small
  • Cancel-Rebill and Screw Your Clients
  • New Risk Alert on Investment Adviser Annual Compliance Reviews
  • When Compliance Says “Do It”, But the Firm Doesn’t
  • Extending Compliance Dates for Form PF
  • The Massive Scope of Digital Asset Investment Scams
  • SEC Proposes Rescission of Political Contribution Rule for Investment Advisers
  • Is Failure to Disclose Misappropriation Committing Securities Fraud?
  • SEC Sweep of Fake Form ADV Filers
  • New Custody Rule Is On Its Way

Fight Cancer

Please support my Pan-Mass Challenge
Make a donation to fight cancer. donate.pmc.org/DC0176
pan-mass challenge badge

I am a lawyer, but I am not your lawyer. Since I’m a lawyer, this website may be considered attorney advertising under the ethical rules of certain jurisdictions. Please read my disclaimers page before taking any action. And then, don't take any action based on what I wrote.

Creative Commons logo with the text 'Some Rights Reserved' and three symbols representing attribution, non-commercial use, and share alike.

Compliance Building - by Doug Cornelius is licensed under a Creative Commons Attribution-Noncommercial 3.0 United States License.

© 2026 Compliance Building | Powered by Superbs Personal Blog theme