The United States Court of Appeals for the Ninth Circuit recently issued an opinion in Pino v. Cardone Capital, LLC that followed the Eleventh Circuit ruling in Wildes v. BitConnect (see our March, 2022 post on that case here:
FTC on crypto scammers and plans to modernize guidance to prevent digital deception
As a follow up to our previous posts on digital assets and social media, the Federal Trade Commission recently published a Consumer Protection Data Spotlight on June 3, 2022. In the post, the FTC provides insights on the fraud reports submitted to the FTC from January 1, 2021 to March 31, 2022. According to the FTC, the fraud reports show that social media and digital assets are a “combustible combination for fraud” with nearly half of those who reported losing cryptocurrency to a scam saying that it “started with an ad, post, or message on a social media platform.” Since the start of 2021, more than 46,000 people reported losing over $1 Billion of cryptocurrency to scams, and during the reporting period, nearly four out of every ten dollars that was lost to a fraud that originated on social media was lost in crypto. This report is another example of agencies and courts taking note, and informing the public that the connection between social media and digital asset fraud is direct, and significant.
IOSCO, finfluencers, and social media
In December 2021, our post Federal Reserve and social media, highlighted sections of the Federal Reserve Financial Stability Report which demonstrated the Fed’s focus on the role of social media and retail investors in equity market volatility. In March 2022, the Board of the International Organization of Securities Commissions (IOSCO) followed suit, and also turned their attention to the role of social media and retail investors. The IOSCO Retail Market Conduct Task Force Consultation Report aimed to set out a toolkit of proposed policy and enforcement measures with guidance to help mitigate the potential risks of retail investor harm posed by online and cross-border marketing and distribution, and digital offerings. The findings of the report demonstrate both the global nature and the importance of these issues.
Social media and cryptocurrency fraud
Creators of fraudulent crypto assets beware. A recent court decision supported investors, creators and marketers of legitimate crypto assets, and the integrity of the crypto asset market as a whole.
While the creator of BitConnect remains at large and is facing his own indictment for his role in the scheme that allegedly defrauded investors of $2.4 Billion, this case focuses on the promoters and marketers of a commodity known as BitConnect Coin.
Federal Reserve and social media
In November of 2021, the Board of Governors of the Federal Reserve (the “Fed”) issued its Federal Reserve Financial Stability Report, a biannual report focused on potential risks to the financial system. In this issue, the Fed highlighted the role of social media and retail investors in equity market volatility.