Republished with full copyright permissions from The San Francisco Press.

Cryptocurrencies have emerged as a new and intriguing asset class. However, despite years of discussion, a clear and convincing argument about their purpose remains elusive. While some proponents liken cryptocurrencies to digital gold due to their scarcity, gold’s long history and practical applications still provide it with a distinct advantage. Before making any investment, it is essential to conduct thorough research and exercise caution. We emphasize the importance of checking the background of investment professionals and provide valuable resources for investors.

When considering investing in any asset class, including cryptocurrencies, it is essential to scrutinize the legitimacy of the individuals and firms involved. The U.S. Securities and Exchange Commission (SEC) offers a valuable online resource called the Investor Website. This platform enables investors to verify whether an investment professional is licensed with the SEC, states, and the Financial Industry Regulatory Authority.

While not all financial professionals are obligated to register with the SEC, even exempt investment advisers are required to disclose certain information through Form ADV. Investors can gain access to this extensive database through the SEC’s website, enabling them to evaluate past registrations with state securities regulators, criminal convictions, regulatory events, and involvement in civil litigation as a defendant.

Unlicensed and unregistered individuals contribute significantly to investment fraud in the United States, as highlighted by the SEC. A recent case involving Richard Heart (also known as Richard Schueler) exemplifies the risks associated with unauthorized offerings of cryptocurrency asset securities. Through misappropriation, Heart promised attractive returns while indulging in personal luxuries, leading to significant losses for his investors. Conducting a quick search in the SEC’s Investor Website could have provided potential victims with valuable information to make informed decisions.

While leveraging the SEC’s Investor Website is an effective risk management tool, it is not without shortcomings. Licensed and registered investment advisers also occasionally engage in misconduct. The system does not immediately display pending civil penalties. However, by utilizing a licensed and registered investment adviser, investors significantly reduce their exposure to fraudulent schemes. It is crucial to conduct thorough due diligence and familiarize oneself with an investment professional’s background before entrusting any funds.

Knowledge is power, especially in the financial realm. Individuals who are already familiar with resources like the SEC’s Investor Website have a higher likelihood of recognizing and avoiding investment scams. However, many retail investors remain unaware of this valuable tool. It is our responsibility to share this information, particularly with vulnerable individuals like grandparents who may be susceptible to persuasive investment pitches without any means to evaluate their legitimacy. Promoting awareness and financial literacy can safeguard investors from unnecessary trouble.

Investing in any asset carries inherent risks, and cryptocurrencies are no exception. Researching investment professionals before making financial decisions is imperative in safeguarding one’s hard-earned money. The SEC’s Investor Website provides a quick and easy means to verify an investment professional’s legitimacy and background. By utilizing this resource and conducting thorough due diligence, investors can protect themselves from fraudulent schemes and make more informed choices.