Know Before You Invest: Initial Coin Offerings

Savage Villoch Law, PLLC
25
Aug

initial coin offeringsInitial Coin Offerings (ICOs) are becoming an increasingly popular platform for raising capital these days, especially within the emerging tech industry. ICOs allow companies to offer virtual coins in exchange for capital contributions from investors. You may be more familiar with virtual currency under names like Bitcoin, Ethereum, or one of the many other forms of cryptocurrency that have popped up.

You have probably heard the hype surrounding ICOs and virtual coins and you may have even considered investing in virtual currency through an ICO. While initial coin offerings can be a great new means for investing, it’s important not to get blinded by the hype. Theses types of offerings are new for many investors. Additionally, they are attached to rapidly evolving and dynamic technologies, some of which you may not fully understand.

Unfortunately, this factor has allowed room for fraudsters and scammers to take advantage of investors. This should not intimidate you from investing in initial coin offerings, however. Education is the best way to prevent investment fraud. Here are some basic things you should know, before you look into investing in an ICO.

What You Need to Know About Initial Coin Offerings

In certain instances, virtual currency offered in an ICO is considered a security. As such, it is subject to regulation by the SEC. The SEC closely monitors companies and firms engaging in initial coin offerings. If there is suspicion of fraudulent activity, the SEC will actually suspend trading operations to protect investors.

If you are offered to invest in an ICO, the best thing you can do is to first check with the SEC on the offering’s regulatory standing. You can also research a company and evaluate the investment risks yourself. When researching a potential ICO investment opportunity, be sure to check:

  • To make sure the company’s public records and reports are up-to-date
  • Take steps to verify, to the best of your ability, that company information provided is accurate
  • Research the company’s recent trading activity, check for suspensions with the SEC

Investor Resources

If you have more questions about investing in initial coin offerings, you can find out more here. The SEC’s EDGAR database provides extensive organizational and financial information for many companies. You can access that database here.

If you believe you invested in an ICO under false pretenses or misleading information, call us to find out your investment recovery options.