FBI Outline Key Features of Scam ICOs, Warns Investors to Be Vigilant
The FBI has outlined what it believes to be the consistent threads running through fraudulent initial coin offerings (ICOs).
The United States Federal Bureau of Investigation (FBI) has actually detailed what it thinks to be the consistent threads running through deceptive initial coin offering (ICO) schemes. The Bureau’s perspective was shared in an interview with Netherlands-based monetary news site the Paypers on Feb. 19.
According to the FBI, the key techniques of rip-off offerings include misstatements of their directors’ professional experience, an engineered false impression of how much traction the ICO has amassed in the industry, and unrealistic promises of potential returns on tokens:
“Like any investment product, rates of return can never be guaranteed and if it sounds too good to be true, it probably is.”
The FBI cautioned investors to carry out due diligence on any plan and the people behind it, and to be on the lookout for entities that appear to be exclusively internet-based, where a physical address or contact is tough or difficult to come by.
The Bureau also recommended investors ought to understand which jurisdiction the offering is registered in, if at all, and to which laws and policies it therefore falls subject to.
The general public can obtain itself of the Financial Industry Regulatory Authority’s BrokerCheck system to verify the identities and registration status of entities, the FBI recommended. Considered that even widely known cryptocurrencies and products might bring increased risks of volatility due to the nascent stature of the market, the FBI recommended prospective financiers to only invest what they can afford to lose.
In regard to legitimate company operators of platforms such as virtual currency exchanges or cryptocurrency ATMs, the FBI kept in mind that both the Financial Crimes Enforcement Network and numerous Federal District Courts have considered such entities as based on registration requirements. Failure to properly register is thus reportedly considered to be in infraction of federal money sending laws.
Expecting the future, the FBI echoed the U.S. Securities and Exchange Commission (SEC)’s stance that a vast swathe of token offerings should be classified as securities which, offered the increasing proliferation of such assets, with lots of industry members preparing for a security token offering trend, financiers need to be wary of the heightened risks of scams.
As previously reported, the FBI represented the greatest number of information demands sent out to Erik Voorhees’ Switzerland-based cryptocurrency exchange ShapeShift last year.
In June 2018, the Bureau revealed it had 130 ongoing crypto-related cases, with dark web drug sales a particular concern. It nevertheless characterized the sector as accounting for merely “a small sliver” of the FBI’s activities in general.
Last year, the SEC tried to educate investors by creating a mock ICO website that lured visitors with a “too good to be real financial investment opportunity.” The website used the warnings the agency declared to have determined in the majority of deceitful ICOs, and redirected those who attempted to purchase the ersatz tokens to an educationally-oriented page on the SEC’s website.