Cryptocurrencies, also known as virtual currencies, are the digital assets driving our financial services industry today. A cryptocurrency is a medium of exchange, such as the US dollar, but is digital and uses encryption techniques to control the creation of monetary units and to verify the transfer of funds.
The launch of Bitcoin back in 2009 created our nation’s first decentralized digital cash system. Satoshi Nakamoto, the inventor of Bitcoin, refers to this system as a “peer-to-peer network for file sharing” or a “peer-to-peer electronic cash system” because within this decentralized system, there are no servers and no central controlling authority. As such, there was no trusted third party to keep records of the balances and transactions.
Instead, a cryptocurrency is generally established and becomes available via “mining,” where market participants verify valid transactions using a set of cultured algorithms and protocols. As of 2017, almost 17 million Bitcoins have been mined and distributed, with every single bitcoin becoming more and more valuable. Satoshi’s innovation spawned an entire industry of Cryptocurrencies, which essentially operate as digital gold to be bought and sold by traders.
The growing interest in cryptocurrencies has encouraged corresponding growth in initial coin offerings (ICOs). ICOs have raised $19.4 billion since 2014 and 12 ICO class actions have been filed in the past two years. One of the first ICO-related class actions was filed in 2017, including allegations of false advertising, securities fraud, unfair competition, and failing to register the offer and sale of securities. This new fundraising mechanism has been the sole target of allegations of abuse due to their perceived lack of accountability and an early disregard for securities law.
According to a recent post by Lexology, “cryptocurrencies have entered into a new phase, with an increase in class actions targeting the emerging assets.” These class actions are growing due to the rapid rise in the number and value of initial coin offerings in 2017, which forced financial regulatory agencies to pay attention to this decentralized digital cash system.
Not to mention, several coin exchanges have been the subject of cyberattacks. The activities of cybercriminals have led to a number of high-profile cryptocurrency hacks that have resulted in millions of dollars being stolen. CipherTrace, a Blockchain security firm, reported that $731 million worth of cryptocurrencies were stolen from crypto exchanges in the first half of 2018.
In theory, cryptocurrencies function as a digital alternative to cash or gold. However, this new industry has become the base of potential fraud and market manipulation.
If you or someone you know feels they have been victimized in this growing cryptocurrency exchange, contact our attorneys right away for a free consultation. We will investigate your claim and you may be eligible to be part of a class action lawsuit targeting cryptocriminals.