Amid the cryptocurrency market risks and fraudulent activities, the US Commodity Futures Trading Commission (CFTC) has issued a warning notice to investors asking them to be cautious of any cryptocurrency-based retirement fund claiming to be “IRS approved” or “IRA approved.”
On a circular dated 2nd February, the CFTC warned investors to be cautious about the false pitches made by many cryptocurrency funds. An excerpt from the circular reads: “Taxpayers 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 made it clear that no government agency, including the CFTC and the IRS, endorse or approve any investment fund. It further clarified that the agencies never give any investment advice to the people.
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The circular added: “The IRS does not approve or review investments for IRAs. Advertisements or solicitations that use this kind of deceptive language should be viewed with caution.”
There is a surprising increase in individual retirement funds based on cryptocurrency investments. These funds often lure investors by advertising the possibility of gaining huge profits compared to the mainstream market. With the current circular from the CFTC, it is clear that many funds often hide the risks associated with these investments from investors, and that some of them are simply fraudulent.
“Custodians and trustees of self-directed IRAs may have limited duties to investors and generally will not evaluate the quality or legitimacy of an investment or its promoters,” says the circular.
The chairman of the CFTC recently presented a written testimony before the Senate Banking Committee and voiced his support for federal regulation on cryptocurrencies.