ODC alert: be cautious when investing in cryptocurrency

R-H Staff

COLUMBUS — The Ohio Department of Commerce has issued a consumer alert for Ohioans to be cautious when investing, buying, and/or selling largely unregulated products such as cryptocurrency. The official alert can be found here. The department’s Division of Financial Institutions issued a License Revocation Order on Friday against West Realm Shire Services Inc., doing business as FTX, after the company ceased crypto trading on its exchange and serious allegations of fraudulent conduct were raised. FTX’s parent company and 100 affiliates filed for bankruptcy on Nov. 11.

FTX is one of several cryptocurrency exchanges that has filed for bankruptcy in 2022. The others are Three Arrows Capital, Voyager Digital, Celsius Network, and Blockfi. Some of these exchanges are registered or licensed with divisions within the Ohio Department of Commerce including FTX, which held a money transmitter license that was granted on Nov. 3. The agency has opened multiple investigations in connection with these entities and will take enforcement action if it uncovers violations of state law.

Exchanges and other platforms have begun offering new financial products and services revolving around crypto such as crypto-backed loans, which allow you to use your portfolio as collateral to secure a loan. But they lack the same protections as traditional banks or investment accounts. If the cryptocurrency or platform that provides the account fails, those assets aren’t insured.

Since Jan. 1, 2022, over 22 percent of incoming complaints for the Division of Securities involve some type of investment through cryptocurrency. During the same period, the Division has acted against four cryptocurrency platforms, including platforms engaged in fraud and misrepresentations.

Ohioans, who have an account with a cryptocurrency company, should check the company’s user agreement to determine if their funds are available in the event of bankruptcy.

R-H Staff