This May 1, 2014 photo taken in Washington, DC shows bitcoin medals. Bitcoin uses peer-to-peer technology to operate with no central authority or banks; managing transactions and the issuing of bitcoins is carried out collectively by the network. AFP PHOTO / Karen BLEIER (Photo credit should read KAREN BLEIER/AFP/Getty Images)
KAREN BLEIER—AFP/Getty Images
By Sam Frizell
May 7, 2014

The U.S. Securities and Exchange Commission (SEC) issued an alert to investors Wednesday warning about the risks of trading Bitcoins and other virtual currencies.

The SEC said that investors might be lured by the potential investments in something “novel, new and cutting-edge” but that Bitcoin represents a significant risk. “A new product, technology, or innovation – such as Bitcoin – has the potential to give rise both to frauds and high-risk investment opportunities,” the SEC said. New technologies make Bitcoin ripe for fraudulent schemes, and the victims of theft may have limited options for recovering lost currency. In addition, Bitcoins are not insured and transfers of the currency are difficult to trace.

“Scam artists take advantage of Bitcoin users’ vested interest in the success of Bitcoin to lure these users into Bitcoin-related investment schemes,” the notice warns.

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