Filing Bankruptcy in Minneapolis, MN and Cryptocurrency #3
Welcome back to our series of blog posts on the history and philosophy of the economy, bankruptcy, and debt – today let’s talk again about a more current topic: cryptocurrency. This post will continue to merely skim the surface of current cryptocurrency issues, for what it is worth. Today, let’s discuss a scam that occurs in the industry: pump and dump.
Pump and dump is illegal with respect to standard securities, but not with respect to cryptocurrency. Perhaps it is because legislation can be slow, or perhaps there are policy concerns, though I cannot personally think of any. Nonetheless, pump and dump schemes are not punished in the cryptocurrency industry. Pump and dumps are normally engineered by those who already hold a certain security in an attempt to get others to invest, thereby improving the schemers’ positions so they can turn around and divest for profit. When the new players buy, the security price goes up, and then the original schemers sell.
In the past, these schemes were based around cold-calling or mailing consumers with purported financial advice. Now, the internet has expanded these schemers’ ability to market themselves, to include: emails, forums, and especially YouTube channels. These communications purport to offer investment advice on investments that are “ready to take off,” or sometimes colloquially described in the industry as going “to the moon.”
Some inherent features of cryptocurrency make these scams highly effective in the industry. First, it is possible to mint your own cryptocurrency and then work to pump and dump the coins. This is vastly less difficult to get off the ground that the pump and dump schemes of the past which required starting a company or fund that would appear to be profitable, then convincing others to invest. Second, cryptocurrency, while not inherently or absolutely anonymous, can provide the means to pump and dump while obfuscating one’s identity quite effectively, so they might disappear once the scam is complete.
In practice, beware of investing in cryptocurrency without robust background knowledge about the industry. Cryptocurrency markets are not new anymore and there are many sophisticated players already in the game. Avoid tips that seem too good to be true, and from sources that are not obviously qualified experts.
CALL NOW FOR A FREE STRATEGY SESSION FROM A MN BANKRUPTCY LAWYER AT LIFEBACK LAW FIRM
We will continue our discussion of cryptocurrency next time. If you are interested in the history and philosophy of the economy, bankruptcy, and debt, stay tuned for my blog posts. And, if you are thinking about filing bankruptcy in Minneapolis, MN, reach out to us at www.lifebacklaw.com.
