Cryptocurrency Risks, Fraud Cases, and Financial Performance

David S. Kerr, Karen A. Loveland, Katherine Taken Smith and Lawrence Murphy Smith ()
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David S. Kerr: Turner School of Accountancy, Belk College of Business, University of North Carolina at Charlotte, Charlotte, NC 28262, USA
Karen A. Loveland: Department of Management & Marketing, Texas A&M University-Corpus Christi, Corpus Christi, TX 78412, USA
Katherine Taken Smith: College of Business, RELLIS Campus, Texas A&M University-Corpus Christi, Bryan, TX 77807, USA
Lawrence Murphy Smith: Department of Accounting, College of Business, RELLIS Campus, Texas A&M University-Corpus Christi, Bryan, TX 77807, USA

Risks, 2023, vol. 11, issue 3, 1-15

Abstract: In this study, we examine major cryptocurrencies, present notable fraud cases, describe fraud risks, and analyze cryptocurrency financial performance. People debate whether cryptocurrency is an investment opportunity, the new Dutch Tulip Bubble, or a giant Ponzi scheme. There have been a number of high-profile fraud cases associated with cryptocurrencies, such as the FTX scandal in late 2022, thereby making fraud a real concern to current and potential future investors. Regarding financial performance, cryptocurrencies experienced a major collapse in value in the most recent period of the study, about three times worse than the major stock market indices. While in prior periods, cryptocurrencies have significantly outperformed stock market indices, recent fraud cases and the extreme volatility of cryptocurrencies indicate that investing in cryptocurrencies comes with much higher risk than traditional stock market investments. The debate over the investment potential of cryptocurrencies continues, whether they have long term value or are simply the new Dutch Tulip Bubble. The study’s findings will be useful to investors, regulators, and academic researchers regarding the cryptocurrency industry.

Keywords: cryptocurrency; Bitcoin; fraud risk; financial investment; Ponzi scheme (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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