Last year Bitcoin and other cryptocurrencies went “mainstream” with regular financial reporting of prices and tales of fortunes made or lost. This has prompted many ordinary investors to try their hand at cryptocurrency investing. This has fed an ever widening set of cryptocurrency products being offered to consumers and businesses alike. These products range from Wall Street backed crypto currency exchanges like coinbase.com to initial coin offerings (“ICOs”) now being used by start-ups to attempt to bypass the regulations that normally apply to the capital-raising process.

The sheer exuberance surrounding cryptocurrencies and the often inaccurate depiction of cryptocurrencies as not subject to ordinary laws is fertile ground for fraudsters and high-risk unsound investment schemes. For example, numerous market players still promote their ICOs as not subject to state or federal securities regulation despite convincing and sound conclusions to the contrary. In fact, use of an ICO may very well expose the entity (and its individual managers) using it as a capital-raising device to potential civil and criminal charges, sanctions, and personal liability to individual investors.

Due diligence requires that before you or your business involves yourself in any crypto currency undertaking that you consult with competent and experienced business counsel so you can fully understand the true risk of the undertaking. Investors who have already lost money in a crypto currency scheme should also exercise due diligence by consulting with counsel because, under existing law, those who involved them in the scheme may be personally obligated to repay for the lost investment.