Recent investor warnings relating to virtual currencies
In recent months, there has been extensive media coverage related to virtual currencies. The virtual currency, Bitcoin, has become a household name, and its value has fluctuated greatly since late last year. North American securities regulators have issued a number of consumer bulletins to educate people about virtual currencies.
We have links to the North American Securities Administrators Association (NASAA) advisory and Securities and Exchange Commission (SEC) bulletins below.
In April 2014, NASAA (the BCSC is a member) issued an advisory on the risks associated with virtual currencies. The advisory explains how virtual currencies work and warns investors that this type of currency is not backed by tangible assets, is highly volatile, and is subject to minimal regulation. You should be very careful before investing in any offering containing Bitcoin or other virtual currency.
In May 2014, the SEC issued an Investor Alert titled: Bitcoin and Other Virtual Currency-Related Investments. This alert focuses more specifically on Bitcoins and the specific risks of that virtual currency. The SEC has also warned investors about fraudulent investment schemes that may involve virtual currencies, which it references in its most recent alert.
In Canada, there is also a recent case focusing on a Bitcoin mining company that appeared to be engaging in the business of trading in securities.
On May 1, 2014, the Financial and Consumer Affairs Authority of Saskatchewan issued a cease trade order against Dominion Bitcoin Mining Co. According to its website, Dominion was selling shares in companies that contract with it.
Please note that we will not be publishing a blog post next week, due to system upgrades.