The Securities & Exchange Commission has issued a special warning against various cryptocurrency platforms offering to hold crypto in return for significant interest on the holder’s accounts, sometimes up to 10%. The SEC warning came on the heels of it fining Blockfi $100 million because it did not register its lending platform under the SEC. The SEC warns that the interest-bearing crypto accounts are different than banks and credit unions in that the Federal Deposit Insurance Corporation and National Credit Union Administration insure the deposits in the banks. However, in interest-bearing accounts, the investors do not have these protections. As such the risk of losing the funds altogether is greater.
In addition, the funds deposited in the high-interest accounts are used to loan the money outside the crypto platform and if the borrowers default the investors may lose it all. The other risks may include bankruptcy of the company, cybersecurity breaches, and much more. It is critical for investors to read the fine print of the exchange that is offering high interest. How liquid is the fund and does the exchange become the owner of the funds once they are deposited? Does the exchange carry insurance to cover the various risks involved and if so, how high are the insurance policies in total and per claim. Another question is, how reliable is the exchange company offering the interest-bearing crypto accounts and how can you determine this. It is not enough to know that a company is publicly traded as publicly traded companies have many ways to hide material financial problems from regulators. Audits are not always independent and reliable. This writer is in the process of analyzing many of the companies offering high-interest crypto accounts. Stay tuned.
JEFFREY NEWMAN REPRESENTS WHISTLEBLOWERS INCLUDING SEC WHISTLEBLOWERS IN MAJOR CASES INVOLVING CRYPTOCURRENCY EXCHANGES. IF YOU ARE AWARE OF MAJOR FRAUD RELATING TO CRYPTOCURRENCY EXCHANGES CONTACT ATTORNEY NEWMAN AT 978-880-4758 OR AT jeff@jeffnewmanlaw.com
