FSC Issues Third Warning! Reminds the Public to Beware of Risks Related to Virtual Assets

Considering the recent collective lawsuits filed by U.S. law firms against multiple virtual asset operators and the incessant reports of blockchain and virtual asset investment fraud cases, the Financial Supervisory Commission has issued warnings three times to remind the public to be cautious of the risks associated with virtual assets.

Financial Supervisory Commission Issues Third Warning

Recently, the Financial Supervisory Commission (FSC) issued news releases on December 19, 2017, and June 22, 2018, warning the public about the risks associated with virtual assets.

Given the recent collective lawsuits filed by U.S. law firms against multiple virtual asset operators and the prevalence of blockchain-related scams involving virtual assets, the FSC has issued warnings for the third time, urging the public to be aware of the risks associated with virtual assets. The warnings issued by the FSC are as follows:(source)

1. Virtual assets have high price volatility and investment risks. Before engaging in related transactions, the public should fully understand their operational mechanisms and carefully assess the potential risks.

2. Virtual assets are not considered legal tender. Engaging in activities involving virtual assets that may violate criminal laws, banking laws, or other related regulations, such as fraud or illegal fundraising, constitutes a criminal offense. If virtual assets fall under the definition of securities as stipulated in Article 6 of the Securities Trading Law and are not in compliance with the relevant provisions of the Securities Trading Law in domestic fundraising, issuance, or provision of trading services to non-specific individuals, it may violate the Securities Trading Law and entail criminal liability.

3. Whether specific cases involve criminal liability under the Criminal Code, Banking Act, Securities Trading Law, or other laws will be determined and handled by judicial authorities based on the specific facts and behaviors.

Continuous Lawsuits

Initiating lawsuits against entities or individuals suspected of violating regulations is a common practice for U.S. law firms.

In April of this year, the U.S. law firm Roche Freedman law firm filed aclass-action lawsuit against multiple exchanges and projects, accusing 11 companies of selling illegal securities to U.S. citizens in the form of virtual assets. The accused exchanges and projects include Binance, Block.one, Tron, Civic, BProtocol, Status, KayDex, Quantstamp, BiBox, KuCoin, and HDR Global Trading.

Furthermore, the U.S. law firm Block＆Leviton filed a class-action lawsuit against the well-known project Tezos three years ago, alleging illegal fundraising and sale of illegal securities. This forced Tezos to seek a $25 million settlement in March of this year to resolve the costly and protracted litigation.

These lawsuits were initiated by law firms for violations of U.S. securities laws and do not necessarily imply fraudulent activities by these exchanges or projects.

Rampant Cryptocurrency Scams

"Any delicious dish will attract cockroaches and mice." The rise of blockchain technology and innovation in cryptocurrencies has naturally become a tool for unscrupulous individuals to swindle money. Not long ago, MP Gao Hong'an of the People's Party held a press conference with Taipei City Councilor Chung Pei-chun and representatives of victims to expose the use of technological jargon by operators to package Ponzi schemes under the guise of a project called Cloud Token, resulting in thousands of victims and a total of NT$900 million in losses.

The scam group's adept marketing and grassroots promotion have pushed their products to the general public, leading many unsuspecting individuals who are unfamiliar with cryptocurrencies to become victims. There are countless cautionary tales about scams on the internet, and it is only hoped that the scammers will have a change of heart and return to the right path, while the public should educate themselves about relevant knowledge and care for their elderly family members to avoid being blinded by money.