FBI, SEC Spread Awareness of ICO Fraud


Ever since cryptocurrency really gained traction in today’s financial market, our top cops on the beat have been busy chasing down scams and fraud cases, and trying to work the negative fringes of this new financial sector.

Now the FBI is attempting to share with the American  (and coin investors) some of the most common aspects of fraudulent initial coin offerings.

In an interview with Netherlands press venue Payper today, reported in Cointelegraph, FBI experts noted some big red flags that investors should watch out for.

One, they say, is inflated notions of leadership experience – in other words, if some unknown figure is supposed to be the next Satoshi or Craig Wright Stevens, look behind the hype to see if there’s actually a good track record there.

The next red flag: “an engineered false impression of how much traction the ICO has garnered in the industry.”

There are surely scores of neat little altcoins that, after promoting the heck out of themselves, end up in the crypto graveyard. Don’t be fooled by anecdotal market stories that seem to prop up a particular dark horse crypto coin. Remember that top coins like Bitcoin and Ethereum are on top for a reason.

The third red flag is something that you might guess straightaway – drumroll please … “unrealistic promises of perspective returns.”

This kind of fraudulent pumping of financial objects is as old as finance itself. The bottom line? If it seems too good to be true, it probably is.

Right now, federal government agencies are trying to figure out the right way to protect investors and consumers as things like Bitcoin ATMs emerge on the horizon.

In months past, the agencies have actually going to step further and created a fake honeypot ICO website intended to catch gullible investors and show them why they should be careful.

A May 16 press release last year showed a site called HoweyCoins.com where users to click on a “Buy Coins Now” button are led to a .gov website with SEC information on coin fraud.

“We embrace new technologies, but we also want investors to see what fraud looks like, so we built this educational site with many of the classic warning signs of fraud,” said SEC chair Jay Clayton at the time. “Distributed ledger technology can add efficiency to the capital raising process, but promoters and issuers need to make sure they follow the securities laws. I encourage investors to do their diligence and ask questions.”

It might have been nice to have a site like this for all of the times America’s 60-somethings and 70-somethings ended up purchasing gold at inflated prices. Nevertheless, this type of fraud awareness activity is especially integral for cryptocurrency, partly because so many lay investors just don’t understand what these assets or holdings are. For example, the SEC routinely talks about how many crypto coins should be classified as securities, while some of them can escape this moniker depending on the context of market activity – then there are different coin uses, for instance, using Bitcoin as a temporary fiat currency or as an investment.

In any case, keep an eye out for fraud and make sure you are protected by doing your due diligence on every single ICO that you might have a passing interest in.