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Retirement accounts that allow investors to dabble in digital assets could be violating securities regulations, the U.S. Securities and Exchange Commission (SEC) has warned.

In its latest investor alert, the watchdog cautioned investors against the risks associated with self-directed individual retirement accounts (IRAs). These accounts allow investment in a broader set of assets, including precious metals, real estate, private securities, and digital assets.

Over the past few years, digital asset investment by IRAs has surged. While some were able to bet on some assets during the bull market for a handsome profit, many others were not as lucky.

“Crypto assets may be securities that are offered without SEC registration or a valid exemption from registration, and may not be accompanied by complete or accurate information to aid investors in making informed decisions,” the SEC warned.

The agency has gone after several digital asset projects for issuing unregistered securities and, in most cases, came out victorious. Data from Elliptic last year revealed that of the $3.3 billion that enforcement agencies have collected as fines and penalties from the industry, 70% has gone to the SEC.

The watchdog is currently going after Ripple for issuing unregistered security in XRP, a lawsuit that has dragged on for years and whose impact will be massive for digital assets.

In addition to securities violation, the regulator also pointed out that most platforms offering digital asset trading services refer to themselves as exchanges, “which may give investors the misimpression that they have registered with the SEC.”

While some investors dipped into their retirement accounts to speculate directly on digital assets, there were others who invested in the Grayscale Bitcoin Trust (GBTC), an ill-fated investment option that gives investors exposure to BTC without purchasing the actual digital asset.

Digital Currency Group (DCG) founder Barry Silbert lured investors years ago with promises that GBTC would convert into an ETF, allowing them to sell their shares easily. The SEC has quashed this dream, rejecting Grayscale’s BTC spot ETF application. Now, investors are left holding shares that trade at a steep discount to the price of the actual BTC while paying a steep premium annually to Grayscale.

“The problem with GBTC is it has turned into Hotel California now. You can check out any time you like, but you can never leave. You can sell, but you can’t redeem those shares,” GBTC investor George Bodine says.

The 66-year-old retired airline captain invested in GBTC in 2020, back when it was trading at a 10% premium to BTC. It has since flipped, and if he were to sell his shares today, he would lose half the money he invested.

Watch: Trust But Verify: Everything

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