SEC Warning: Unregulated Cryptocurrency Exchanges Place Investors at Risk

The U.S. Securities and Exchange Commission (SEC) has issued a warning advising investors to use caution when dealing with cryptocurrency exchanges. Since many cryptocurrency exchanges are unregulated, they can do whatever they want with an investor's money.

These platforms claim to enable investors to have quick, easy access to automated systems that display orders and execute trades, making it simple for them to buy and sell digital assets. Many of these assets, including virtual coins and tokens, meet the definition of "securities". According to the SEC, cryptocurrency exchanges that sell securities and meet the federal securities law's definition of exchanges should follow the same rules as every other type of exchange and should have to register through the SEC as a national securities exchange, broker-dealer, or alternative trading system.

Although it is common for trading platforms to refer to themselves as exchanges, giving investors the impression that they follow strict regulations or that they meet the standards of a national securities exchange, many online trading platforms follow their own set of rules for listing new cryptocurrencies. Since the SEC does not review the trading tools in cryptocurrency exchanges and has no control over the way they operate, there is no guarantee that the exchange follows any kind of industry standards.

A Word of Advice for Cryptocurrency Investors

Cryptocurrencies have increased in popularity over recent years, especially with the founding of Bitcoin. As a result, more and more cryptocurrency exchanges have entered the scene. Unfortunately, with so many unregulated exchanges investors are being placed in a vulnerable situation, primarily because many may not even be aware that their investments are with an unregulated exchange. When considering buying or selling digital assets on an online trading platform, the SEC recommends that investors choose an entity or platform that is registered with the SEC so they can benefit from the protections of federal securities laws and SEC oversight.

For more information about cryptocurrency trading and your rights, contact Meyer Wilson today to speak with our investment loss lawyers by filling out our online form or calling us at (800) 738-1960 to schedule a free case consultation.

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