West Palm Beach Cryptocurrency Fraud Attorney

Potent federal defense for those charged with Bitcoin-related criminal charges

Cryptocurrency has revolutionized digital transactions by creating a public, anonymous record of virtual sales, purchases, and exchanges. Along with revolutionizing the way money is stored and exchanged, the exciting cryptocurrency boom has brought brand new opportunities for criminals to conduct illegal transactions and defraud investors. Unfortunately, people who wish to launder money and make illegal sales and purchases were among the earliest adopters of cryptocurrency. Over the past decade, law enforcement agencies at every level of government have been making a concerted effort to catch up to the fast rate at which cryptocurrency has become more mainstream. Because cryptocurrency transactions can serve many different purposes, there are several different ways cryptocurrency fraudsters execute their schemes.

Fraudulent exchanges

Most people enter the world of cryptocurrency by purchasing virtual coins through an exchange. There are a few well-known exchanges that are mosty considered to be reputable. However, people who are interested in lesser-known alt coins are often required to make purchases through smaller exchanges. There are thousands of alt coins, many of which are legitimate products that have a great deal of potential as investment vehicles. Once an investor has determined the legitimacy of an alt coin, he or she must find an exchange that sells the coin. Fraudsters sometimes set up their own exchanges and claim to offer a virtual venue through which interested buyers and sellers can exchange alt coins. In some cases of cryptocurrency fraud that have involved fraudulent exchanges, very popular exchanges have disappeared overnight along with all the customers’ personal information and any crypto coins they may have had stored in their account with the exchange. In other cases, customers find that they are unable to receive a satisfactory response from customer service when requesting a refund or help with a transaction for which they have already paid but are dissatisfied.

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Pump and dump schemes

A common way people manipulate cryptocurrency prices is by orchestrating a pump and dump scheme. Groups create pump and dump schemes by coordinating on messenger services like Telegram and WhatsApp. The members of the group agree to individually purchase an alt coin to quickly inflate the price and make the coin more attractive to others. After members of the general public who are not involved in the scheme notice the growth and invest in the alt coin, the group dumps or sells their coins simultaneously to share the profit, leaving the uninvolved investors to take a loss.

ICO scams

When a new coin is about to launch, the company will typically allow investors to purchase in-house coins during the initial coin offering (ICO) phase. Investors make the initial investment based on the expectation that the company will further develop the coin and eventually make it available to the public. In response to the rapidly accelerated public interest in cryptocurrency, scammers quickly found ways to make money off of fraudulent ICOs. Groups began posing as companies offering ICO opportunities. Instead of making the coin available to the public, the group simply disappears with the investors’ money, and they never develop the coin as originally advertised.

Related white collar crimes

Currently, there is no single statute that alone regulates all cryptocurrency crimes. Therefore, people who are caught advancing cryptocurrency scams are typically charged with a related offense under federal law. For example, virtually all cryptocurrency scams require the fraudster to commit wire fraud as he or she is highly likely to be receiving electronic payments from investors or customers. Organized crime groups and individuals who receive payment for illegal activity through cryptocurrency transactions may be charged with money laundering. People who operate illegal exchanges may be accused of securities fraud. Nowadays, Ponzi schemes exist in the world of virtual currency as more people are now using crptocurrency as an investment vehicle. Virtually all cryptocurrency scams also involve at least one other white collar crime that is specifically prohibited by federal law. Because many schemes involve multiple offenses, the penalties can add up very quickly if convicted.

Federal law and cryptocurrency scams

Cryptocurrency scams are investigated by the federal government via the Securities Exchange Commission (SEC). Cases that involve tax evasion may also be investigated by the IRS while other instances may call for cooperation with the FBI. The SEC has determined that digital coins are securities and are, therefore, subject to federal securities laws. To better allow the government to track transactions and crack down on fraud, the SEC now labels certain people and entities as “money transmitters,” depending on the role they play in the cryptocurrency market. Money transmitters must now meet stricter registration requirements in order to remain in compliance with SEC rules. The SEC has also clarified that those who engage in pump and dump schemes may be considered to be artificially manipulating the market in a manner that violates federal law.

Getting help from the right lawyer

Cryptocurrency cases are often very technical in nature. Therefore, those who are accused of participating in a cryptocurrency scheme require an attorney who has experience with cryptocurrency cases in addition to professional relationships with experts who work with virtual currency and related technology. Individuals who are accused of cryptocurrency fraud are strongly advised to contact a West Palm Beach cryptocurrency fraud defense lawyer as soon as it is presumed that an investigation is underway. Contacting a lawyer as early as possible can afford the client the protection of a seasoned qualified legal advocate and the critical legal counsel that is needed to understand the complicated criminal law process as it relates to an area of law that is still under development.