NY Attorney General warns of risks after crypto market crash

Rick Steves

“Too often, cryptocurrency investments create more pain than gain for investors.”

New York Attorney General Letitia James has warned NY residents of the risks of investing in cryptocurrencies, after last month’s crypto market plunge, wiping away hundreds of billions in investments.

Besides the extreme market volatility that has been a feature of the digital asset space, the collapse of Terra (LUNA) and UST have put a dent in the general confidence in the ecosystem.

The NYAG office has recently pulled the plug on Tether over lack of transparency and false statements on its USD backing and issued an $18.5 million fine.

“Over and over again, investors are losing billions because of risky cryptocurrency investments,” said Attorney General James. “Even well-known virtual currencies from reputable trading platforms can still crash and investors can lose billions in the blink of an eye. Too often, cryptocurrency investments create more pain than gain for investors. I urge New Yorkers to be cautious before putting their hard-earned money in risky cryptocurrency investments that can yield more anxiety than fortune.”

NY Attorney General offers guidance on crypto risks

Due to the extreme volatile nature of the digital asset market, which is also ridden with hacking, fraud and theft, NYAG Letitia James provided guidance to investors in virtual assets, who “should beware of the many significant risks of investing in these products including:

  • Highly Speculative and Unpredictable Value: Virtual currencies are easy to create and spread in the market quickly. Their underlying value is highly subjective and unpredictable. As a result, prices can swing wildly and crash without warning and without regard to any changes in the real economy. At times, price fluctuations are driven by market hype on various social media platforms.
  • Difficulty Cashing Out Investments: There is no guarantee that you will be able to liquidate your investments when you want — such as when the crypto markets begin to crash. During times of crisis, trading platforms may halt trading or purport to experience technical difficulties, preventing you from accessing your assets.
  • Higher Transaction Costs: Some trading platforms charge fees on transactions such as transferring funds and withdrawing money. These fees can vary depending on the size of the transaction and overall trading volume. Therefore, it may also cost you more to access your assets when you need them the most.
  • Unstable “Stablecoins”: Despite their misleading name, there is no guarantee that your stablecoin investment is protected from decreasing value. The nature and quality of the assets backing stablecoins — if there are any assets backing the stablecoin — can vary greatly and along with that so can the risks associated with holding such coins.
  • Hidden Trading Costs: Value in cryptocurrencies and other virtual assets may be propped up by automated trading, or bots, that are, for example, programmed to spot when another trader is trying to make a purchase and then buy ahead of the trade. This practice can push up the price and cost you more to purchase the same virtual asset.
  • Conflicts of Interest: Many operators of virtual currency trading platforms are themselves heavily invested in virtual currencies, and trade on their own platforms without oversight. The financial interests of these operators may conflict with your interests. There have also been recent reports of large investors receiving favorable treatment, such as private cash-outs away from the market.
  • Limited Oversight: There are no federally regulated exchanges, like the New York Stock Exchange or Nasdaq, for virtual currencies. Virtual currency trading platforms operate from various places around the world, many of which are not easily accessible to American law enforcement. Many platforms are subject to little or no oversight. If you are the victim of fraud on one of these exchanges, you will likely have no recourse in the United States. Further, many issuers of virtual currencies are not regulated and therefore are not subject to net capital requirements or examinations. Thus, people who lose money trading a certain virtual currency may have no recourse with respect to the issue of the currency.

Attorney General James has recently issued a taxpayer notice to virtual currency investors and their tax advisors to accurately declare and pay taxes on their virtual investments.

In October 2021, Attorney General James directed unregistered crypto lending platforms to cease operations for not fulfilling their legal obligations.

Read this next

Metaverse Gaming NFT

DCentral Miami brings together all of Web3, NFT, DeFi, Metaverse

The world’s biggest Web3 meeting entitled DCENTRAL Miami is set to take place November 28-29, featuring a lineup of some of the biggest and most influential names in the blockchain space.

Digital Assets

Crypto ban expands across UK banks as Starling joins ‎crackdown

UK digital bank Starling has banned ‎all customer payments related to cryptocurrencies, another blow for the crypto traders ‎who recently saw a sizable number of banks deciding not to ‎finance the wobbly asset class.‎

Interviews

Markets Direct at FIA EXPO 2022: Traders know what they want from brokers

The FIA Expo 2022, one of the most prestigious events within the global derivatives trading industry, took place in Chicago on 14 & 15 November.

Interviews

FIA Expo 2022: TNS addresses public cloud limitations with hybrid infrastructure

November is the month of the FIA Expo, one of the largest futures and options conferences in the world, bringing together regulators, exchanges, software vendors, and brokers in one place: the Sheraton Grand Chicago Riverwalk. 

Retail FX

Italy’s regulator blacks out Finance CapitalFX, MFCapitalFX

Italy’s Commissione Nazionale per le Società e la Borsa (CONSOB) has shut down new websites in an ongoing clampdown against firms it accuses of illegally promoting investment products in the country.

Retail FX

Suspected leader of Honk Kong ramp-and-dump scam appears in court

A leader of a sophisticated ramp-and-dump scheme made his first court appearance in a Hong Kong court today, charged with market manipulation and various criminal offences. The case stems from an earlier joint operation of Hong Kong’s financial watchdog, the Securities and Futures Commission (SFC), and the local police. 

Institutional FX

Cboe’s James Arrante discusses growing demand for fixed income, FX algo

We caught up with James Arrante, senior director of FX & US treasuries product and business management at Cboe Global Markets, to uncover emerging trends in the FX and fixed income markets and learn more about the bourse operator’s recent initiatives.

Retail FX

Eurotrader acquires UK broker Petra Asset Management

Eurotrader Group has formally entered into the UK market with the acquisition of FCA-regulated broker, previously named Petra Asset Management Ltd. The new entity operates under the brand name Eurotrade Capital Ltd.

Inside View, Retail FX

The Game of Chess Continues – OPEC, China and the Oil Market

Over the past decade, the US has been complaining about the amount of power which the BRIC group, and specifically China, has on the global economy. BRIC stands for Brazil, Russia, India and China; these were the world’s fastest growing economies. Only in the past 10 months, the US has turned their attention toward OPEC due to the prices of fuel. Nevertheless, China seems to have a strong influence even over the price of crude oil.

<