Ohio Division of Securities Highlights Cryptocurrency Investment Risks

COLUMBUS, Ohio- The Ohio Department of Commerce Division of Securities urges Ohioans, particularly the elderly, to be cautious when considering investing in cryptocurrency. With the growing popularity and rapid adoption of digital currencies, all potential investors should always make sure they fully understand the inherent risks and red flags associated with cryptocurrency investments, especially given their popularity with fraudsters looking to scam investors out of their money.

According to a recent report from the Better Business Bureau Institute for Marketplace Trust, investment scams are now the riskiest types of fraud in the United States, with fraudsters using cryptocurrency more frequently to cheat their victims out of thousands of dollars. According to the report, the median dollar amount lost was $3,800.

In addition, according to the FBI's 2023 Internet Crime Report, investment fraud connected to cryptocurrency rose from $2.57 billion in 2022 to $3.96 billion in 2023 across the country, which reflects an increase of 53%. The report also found that Ohio had 928 residents reporting a cryptocurrency scam with an estimated total loss of $69.6 million.

"Unlike traditional stocks and bonds, investing in cryptocurrency is highly speculative. You're essentially betting that the price will rise based on others' interest in buying it, without any guarantee of future earnings or cash flow," said Timothy Jones, Investigator Supervisor with the Ohio Division of Securities. "It's a risky investment, so investors should never invest more money than they can afford to lose comfortably. Don't put your financial future in jeopardy."

Key Insights and Warnings Regarding Cryptocurrency

• Instantaneous Transactions:Cryptocurrency transactions are nearly instantaneous and irreversible. Unlike traditional financial transfers through services like Zelle or CashApp, which can take at least 24 hours to process, once cryptocurrency is sent, it cannot be recalled.

• Anonymity and Smokescreen:It is difficult to determine the recipient of cryptocurrency transactions. Unless transactions are processed through a reputable centralized exchange, it is nearly impossible for law enforcement or regulators to identify the parties involved.

• Speculative Nature:Cryptocurrency investments are highly speculative and not backed by tangible assets or regulatory oversight. This makes them inherently risky, with the potential for investors to lose their entire investment in a matter of minutes.

• Cryptocurrency Varieties:Not all cryptocurrencies are created equal. Stablecoins, for example, maintain a 1:1 ratio with the U.S. dollar and do not fluctuate in value. Other cryptocurrencies such as Bitcoin and Ethereum are more volatile and carry different risks.

Recommendations for Potential Investors

• Do Your Research:Thoroughly research both the cryptocurrency you are considering and the platform through which you plan to invest. Do not rely solely on a website's appearance or testimonials.
• Verify Licensing:Ensure that any individual or entity you are dealing with is licensed by verifying this information through the Ohio Division of Securitiesat (614) 644-7381.
• Beware of Pressure Tactics:Be cautious of high-pressure tactics. Scammers often create a sense of urgency to prompt victims to make quick decisions without conducting the proper research. Take your time to understand the investment fully before you make any decisions.
• Use Reputable Platforms:Only use well known and reputable exchanges for cryptocurrency transactions, and avoid moving funds away from established platforms.
• Protect Your Digital Wallet:Keep your private keys secure, as losing them can result in irreversible loss of your cryptocurrency.

"If you want to invest in cryptocurrency, be sure to find a reputable and licensed investment advisor," Jones said. "Do not rely on someone you just met on social media. Always resist the fear of missing out."

John Crist, registration attorney with the division, says cryptocurrency can be both a speculative investment and a tool for fraudsters due to its opaque and unregulated nature which only adds to the risk of using it.

"Fraudsters use cryptocurrency as a tool to hide their true intentions, which is often to steal money," Crist said. "Always be vigilant and skeptical of too-good-to-be-true offers."

For more information on cryptocurrency investments and to verify the licensing of individuals or entities, contact the Ohio Division of Securities at (614) 644-7381. The Division also encourages Ohioans to check out the following resources on its website by clicking here.

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Timothy Jones, Investigator Supervisor, Ohio Division of Securities

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About the Ohio Division of Securities

The Division of Securities is part of the Ohio Department of Commerce. The department is Ohio's chief regulatory agency, focused on promoting prosperity and protecting what matters

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