FTC Cryptocurrency: Marketing Rules Apply

April 4, 2018

The FTC is going after four people for allegedly promoting “deceptive money-making schemes involving cryptocurrencies.” According to commissioners, the accused promised dramatic gains and delivered squat.

FTC Cryptocurrency: Token Investment Ponzi Scheme?

The FTC accused three defendants of creating a crypto pyramid scheme that promised “big rewards for a small payment of bitcoin or Litecoin.” Specifically, the business’ marketing materials tempted potential investors to turn $100 into $80,000 a month. To join, participants had to make a payment to extant investors. As such, the scheme’s success relied on a constant stream of new investor recruits.

According to the FTC, the scheme leaped out of Ponzi’s playbook, in large part because “the majority of participants would fail to recoup their initial investments.”

When asked about the Crypto Ponzi case, the acting director of the FTC’s Bureau of Consumer Protection Tom Pahl explained :

“This case shows that scammers always find new ways to market old schemes, which is why the FTC will remain vigilant regardless of the platform – or currency used. The schemes the defendants promoted were designed to enrich those at the top at the expense of everyone else.”

FTC Cryptocurrency: Promotional Language Matters

In these recent FTC cryptocurrency actions, commissioners also objected to promotional assertions about doubling your money in 50 days. Remember: Don’t publish guarantees that your business can’t fulfill — it’s against FTC regulations (link). When it comes to marketing materials, faking it till you make it is not OK. All advertising claims must be factually supported with evidence.

While these cases wend their way through the courts, the FTC froze the defendants’ assets and issued temporary restraining orders.

Connect With An FTC Cryptocurrency Lawyer

The cryptocurrency and blockchain markets are relatively young, mostly unregulated, and growing like a Chia Pet on steroids.  If you’re a startup or investor in the space, it’s wise to consult with a cryptocurrency attorney before making moves or launching a project. Though specific industry regulations are currently in limbo, some standing financial, promotional, and business regulations absolutely do apply.

We have been consulting — and investing — in the virtual currency space since the early days of Bitcoin. Moreover, as both attorneys and CPAs, our firm has a unique, holistic, and more nuanced understanding of the crypto ecosystem.

Give us a ring. Let’s talk about what our experienced cryptocurrency legal team can do for you.

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