CFTC Issues Advisory about Fraudulent Crypto Retirement Accounts

The U.S. Commodity Futures Trading Commission (CFTC) has warned investors to be cautious of any digital currency retirement accounts that claim to be “IRS approved” or “IRA approved”.

In a customer advisory issued on February 2, the CFTC referred to self-directed Individual Retirement Accounts (IRAs) in particular, explaining that these are held by trustees or custodians who may permit investments in a wide variety of assets (such as cryptocurrencies or gold), but who generally do not investigate the legitimacy of the investment or the team behind it.

“Tax payers tend to focus on retirement savings more at tax time in order to increase deductions or maximize savings. As a result, some businesses may attempt to lure customers into buying highly volatile cryptocurrencies using false claims or by painting virtual currencies as less risky because they can be used for retirement saving.”

The CFTC clarified that federal agencies – including the CFTC itself and the IRS – do not “approve or review investments for IRAs”, nor do they endorse any type of investment, offer advice on investments, or issue statements which suggest that any investments in an IRA are approved, regulated, or protected by them.

The advisory also added that the crypto market had been particularly volatile of late, and investors will not be protected from these wild price fluctuations simply because the cryptocurrencies are held in an IRA. It outlined a variety of risks associated with digital currencies, such as the unregulated nature of the market, the risk of hacks, and the difficulty of retrieving lost or stolen digital assets.

In related news, CFTC chairman J. Christopher Giancarlo and Securities and Exchange Commission chief Jay Clayton are set to testify on cryptocurrencies at a U.S. Senate hearing – entitled “Virtual Currencies: The Oversight Role of the U.S. Securities and Exchange Commission and the U.S. Commodity Futures Trading Commission” – later today.