The top ten questions you should ask before investing in #blockchain #bitcoin #ripple #ethereum #bitcoincash #cardano #stellar #litecoin #XEM #MIOTA #Dash #cruptocurrency #altcoin #darkcoin are:
1. Who exactly am I contracting with?
A major consideration is who are you contracting with. It is important to check their backgrounds by performing a google search of their names and the company’s name. It’s important to exercise professional skepticism based upon what you find as a result because some of the content could be sponsored. In such a case, it may not be independent. Many Initial Coin Offerings issue white papers as business plans. You should read the white paper to determine if a business plan exists. A final consideration is to ascertain where are they located. Are you contracting out of state or out of country?
2. Where is my money going and what will be it be used for?
Is my money going to be used to “cash out” others?
3. What specific rights come with my investment?
4. Are there financial statements?
If so, are they audited, and by whom?
5. Is there trading data?
If so, is there some way to verify it?
6. How, when, and at what cost can I sell my investment?
For example, do I have a right to give the token or coin back to the company or to receive a refund Can I resell the coin or token, and if so, are there any limitations on my ability to resell?
7. If a digital wallet is involved, what happens if I lose the key?
8. Are there substantial risks of theft or loss, including from hacking?
9. If a blockchain is used, is the blockchain open and public?
Has the code been published, and has there been an independent cybersecurity audit?
10. Has the offering been structured to comply with the securities laws and, if not, what implications will that have for the stability of the enterprise and the value of my investment?
What legal protections may or may not be available in the event of fraud, a hack, malware, or a downturn in business prospects? Who will be responsible for refunding my investment if something goes wrong?
The SEC’s full list is available at www.cjzfirm.com/bitcoin/ @ 11 DEC 2017 Update and at Jay Clayton’s Statement on Cryptocurrencies and Initial Coin Offerings SEC and Statement of Chairman Jay Clayton and Commissioners Kara M. Stein and Michael S. Piwowar on “NASAA Reminds Investors to Approach Cryptocurrencies, Initial Coin Offerings and Other Cryptocurrency-Related Investment Products with Caution” by NASAA
Links
- NASAA Reminds Investors to Approach Cryptocurrencies, Initial Coin Offerings and Other Cryptocurrency-Related Investment Products with Caution January 4, 2017
- SEC Division of Enforcement and SEC Office of Compliance Inspections and Examinations Statement on Potentially Unlawful Promotion of Initial Coin Offerings and Other Investments by Celebrities and Others (Nov. 1, 2017)
- Investor Alert: Public Companies Making ICO-Related Claims (Aug. 28, 2017)
- Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934: The DAO (July 25, 2017)
- Investor Bulletin: Initial Coin Offerings (July 25, 2017)
- Investor Alert: Bitcoin and Other Virtual Currency-Related Investments (May 7, 2014)
- Investor Alert: Ponzi Schemes Using Virtual Currencies (July 23, 2013)
NASAA’s Common Cryptocurrency Concerns |
Some common concerns investors should consider before investing in any offering containing cryptocurrency include: |
|
|
|
|
|
Common Red Flags of Fraud |
NASAA also reminds investors to keep watch for these common red flags of investment fraud: |
|
|
|
|
|
SEC’s Sample Questions for Investors Considering a Cryptocurrency or ICO
Investment Opportunity
- Who exactly am I contracting with?
- Who is issuing and sponsoring the product, what are their backgrounds, and have they provided a full and complete description of the product? Do they have a clear written business plan that I understand?
- Who is promoting or marketing the product, what are their backgrounds, and are they licensed to sell the product? Have they been paid to promote the product?
- Where is the enterprise located?
- Where is my money going and what will be it be used for? Is my money going to be used to “cash out” others?
- What specific rights come with my investment?
- Are there financial statements? If so, are they audited, and by whom?
- Is there trading data? If so, is there some way to verify it?
- How, when, and at what cost can I sell my investment? For example, do I have a right to give the token or coin back to the company or to receive a refund? Can I resell the coin or token, and if so, are there any limitations on my ability to resell?
- If a digital wallet is involved, what happens if I lose the key? Will I still have access to my investment?
- If a blockchain is used, is the blockchain open and public? Has the code been published, and has there been an independent cybersecurity audit?
- Has the offering been structured to comply with the securities laws and, if not, what implications will that have for the stability of the enterprise and the value of my investment?
- What legal protections may or may not be available in the event of fraud, a hack, malware, or a downturn in business prospects? Who will be responsible for refunding my investment if something goes wrong?
- If I do have legal rights, can I effectively enforce them and will there be adequate funds to compensate me if my rights are violated?
#blockchain #bitcoin #ripple #ethereum #bitcoincash #cardano #stellar #litecoin #XEM #MIOTA #Dash #cruptocurrency #altcoin #darkcoin