Ponzi Schemes In Forex Trading: How Mississippi Attorneys Can Help

Ponzi Schemes In Forex Trading: How Mississippi Attorneys Can Help – The crash of 2022 shook the cryptocurrency market to its core, but investors are still buying digital currencies. How does crypto work, and what does the future hold for it?

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Ponzi Schemes In Forex Trading: How Mississippi Attorneys Can Help

Jeff is a former CFO, financial expert and attorney specializing in financial and investment analysis, as well as legal and regulatory issues related to business and finance. Previously he was Director of Global Liquidity Investment Solutions, Western Regional Manager at Bank of America and Head of Bankruptcies and Restructuring at Allstate Insurance.

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The 2022 crypto market crash has reinforced ongoing concerns about the future of crypto, although many investors still maintain a high level of interest in digital assets. Anyone considering investing in the space should be sure to have a solid foundation in the challenges and possibilities of crypto.

The challenges are considerable: Hype, bubble mentality and fraud have periodically inflated the values ​​of digital currencies over the years. Fiduciary responsibility, regulation and oversight are still lacking in the sector. And the environmental toll of crypto-intensive computing demands is alarming for consumers and governments.

Despite these concerns, optimism remains high among enthusiasts. The global market cap of cryptocurrency exceeded $1 trillion by May 2023. The commanding attention is also the noncrypto possibilities of blockchain technology under the coins, which has powerful applications in many sectors, from healthcare to media to supply chain management.

In this article, I have mentioned some of the controversies and crises that have characterized the crypto market in recent years. I also provided a broader view of the nature of crypto, its regulatory and accounting treatment, and what potential investors need to know as they consider this volatile sector.

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The majority of Americans do not trust the security and reliability of cryptocurrencies, according to a 2023 Pew Research Foundation study. Even for crypto-enthusiasts, there are many factors that could keep you awake at night.

Many crypto tokens are volatile and vulnerable to scams, but even those that have been announced as stable and supposedly backed by assets to ensure that their value has collapsed.

In May 2022, the digital stablecoin TerraUSD and the algorithmic stablecoin linked to it, LUNA, crashed, tanking the crypto market and causing investors to lose more than $400 billion. Then, in November of the same year, the crypto exchange FTX crashed due to insufficient liquidity, poor fund management and excessive withdrawal from nervous investors – depressing the value of its token, FTT, and even those of numerous other cryptocurrencies, including Bitcoin and Ethereum.

The CoinDesk Market Index is a broad index designed to measure the market capitalization-weighted performance of the digital asset market. The volatility of the crypto market in the five years since the 2018 peak of crypto is reflected here.

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Other major exchanges were also affected by the fall of FTX: BlockFi froze withdrawals, as did Gemini’s third-party lending partner, Genesis Global Capital. Crypto.com has also frozen withdrawals of stablecoins USDC and Tether (USDT), whose values ​​are based on the US dollar. Coinbase has laid off nearly 1,000 employees in connection with the fallout from the crash.

The crypto crash also brought the NFT market. The most famous NFTs, such as Bored Ape Yacht Club and CryptoPunks, saw their prices reduced by more than half in August 2022. While the collapse paralleled a decrease in cryptocurrency prices, other factors such as and high-profile scams and market oversaturation have also played a significant role. .

Well before these developments, the crypto market had already crashed several times, including in 2021, 2020, 2018, 2013, and before, largely due to investor speculation and media hype. While this shows that instability is endemic to crypto, it also shows that the technology and currencies are resilient.

In 2022 alone, some of the most revered players responsible for keeping digital currencies running have been accused of crimes like fraud, including FTX’s Sam Bankman-Fried; Do Kwon, head of Terraform Labs, the parent company of TerraUSD and LUNA; and Su Zhu and Kyle Davies of Three Arrows Capital.

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Even in 2022, criminals have generated 117,000 scam tokens, robbing investors of billions of dollars. Many initial coin offerings (ICOs) are also suspect, especially for cryptocurrencies with speculative business models, and have been widely criticized as scams.

The pseudonymous and unregulated nature of blockchain and Bitcoin transactions also raises concerns when transactions should be disputed. In a typical centralized transaction, if the good or service is defective, the transaction can be canceled and the funds returned to the buyer. However, there is no central organization in the cryptocurrency ecosystem to facilitate recourse against the seller.

While the blockchain itself is extremely difficult to hack, the same cannot be said for the exchanges where cryptocurrency is traded. Hacking and theft have plagued the market for nearly a decade. The first major exchange hack happened in 2015, when hackers made off with 850,000 Bitcoin from Mt. Gox, based in Tokyo. In November 2022, when FTX declared bankruptcy, criminals hacked the exchange and made 600 million dollars. The previous month, hackers stole $570 million from Binance. Other attacks occurred in 2021 and early 2022, with combined stolen funds totaling more than $1 billion.

The code that powers smart contracts can also be hacked. In one of the “biggest digital acts in history”, a hacker stole $613 million from Poly Network in 2021. This decentralized financial platform (DeFi) allowed peer-to-peer (P2P) transactions, that is, direct exchanges of tokens through blockchains. . The theft was possible due to a vulnerability in the smart contract that automated the transfer of tokens. Although the hacker returned the money after a few days, claiming that he only wanted to “expose the vulnerability”, the incident highlighted the significant risks that these platforms and their users face.

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Also widespread are ransomware attacks in which hackers infiltrate user accounts, encrypt their targets’ personal information to make it inaccessible, and extort money by demanding cryptographic payments.

Coins that verify consensus through proof of work, such as Bitcoin, use enormous amounts of energy. Proof-of-stake tokens, like Ethereum after its 2022 transition, consume much less. Ethereum says it uses 99.9% less energy than before, while the Center for Alternative Finance at the University of Cambridge says that comparing Ethereum’s pre- and post-merger energy use is like comparing the wheel observation London Eye to a raspberry.

According to a US government fact sheet, by August 2022, crypto is believed to consume between 120 and 240 billion kilowatt-hours per year – more than the annual electricity use of some countries. While not at the top of the list, it is one of the contributors to global climate change.

In addition, crypto mining has caused problems with the power grids of many nations, including Iran and Kosovo, leading to significant power outages.

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Because cryptocurrency technology transcends political borders, the influence of national regulators is limited. Global regulators the Financial Stability Board and the International Monetary Fund have joined forces to create a coherent global framework for regulation, with new rules expected from September 2023.

Many individual countries have decided not to wait, however. Due to concerns about the environment and/or crime, a handful of nations—including China, Egypt, Iraq, Morocco, Algeria, and Tunisia—have banned the issuance or possession of the tokens, while 42 others have implemented restrictions banning crypto exchanges. or impose limitations on how banks can deal with currencies. Yet other countries have tried to encourage companies to create markets for these assets.

Japan, Switzerland and the United Arab Emirates changed laws or introduced new ones between September 2022 and January 2023. PwC called the Swiss framework one of the most mature to date and said the UAE created the first authority in the world alone. dedicated to virtual currencies. Other nations, such as Canada, the United Kingdom and ​​Australia, are still drafting legislation, with the EU close to promulgating these regulations.

In the United States, Congress has begun to monitor cryptocurrency more closely in recent years, and events such as the fall of FTX will likely prompt additional scrutiny.

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However, since cryptocurrencies were designed specifically to avoid government controls, it is uncertain whether regulatory efforts will be successful.

While the concerns surrounding cryptocurrency are many, it remains very appealing to some investors for a number of reasons. Many are attracted by the speculative element inherent in changing crypto prices, which prompts investors who seek to profit from changes in market value.

Other investors like cryptocurrencies for the unique qualities they offer, such as decentralization, security and anonymity, which traditional currencies do not provide. These perceived advantages are largely theoretical at the moment, but crypto enthusiasts believe faster and cheaper transactions, improved security and privacy, and greater financial inclusion will come, and lead to more mainstream adoption.

Many invest in cryptocurrencies as a geopolitical hedge. During times of political uncertainty, the prices of these coins tend to rise. As political and economic uncertainty in Brazil grew in 2015, for example, Bitcoin exchange trading increased by 322%, while wallet adoption grew by 461%. Bitcoin prices have also increased in response to destabilizing political events such as Brexit.

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A common misconception is that cryptocurrencies guarantee completely anonymous transactions. I do not know. Instead, they offer pseudonyms, a

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