FBI recently decided to make a move against fake initial coin offerings (ICOs) in order to reduce the number of scams and protect new investors from being tricked out of their money. The Bureau outlined some of the fraudulent ICOs’ key features, pointing them out in a recent interview with the news media headquartered in the Netherlands.
According to the FBI’s investigation, there is a set of key parameters that may indicate that the token sale might be a scam. Some of the clues include misrepresentation of the ICO officials’ professional experience, unrealistic promises of large returns on investments, as well as providing a false impression of the amount of interest in the project.
The Bureau stresses out the promise of large returns is usually the biggest sign that something is wrong, as there is no way to guarantee the success of the project. In other words, if there is an impression that the project sounds too good to be true, it is usually correct.
Investors are urged to do thorough research
Fake ICOs are far from being a new occurrence, but even so, they still manage to trick enough new investors for their efforts to end up being profitable. The FBI also points out that investors should be on the lookout for details such as the physical address of the project, or the lack of any. The same goes for methods of establishing contact with the projects’ teams, as it is usually too expensive for scammers to go that far into organizing the scam.
Another thing to watch out for, according to the Bureau, is the jurisdiction in which the project is registered, as different jurisdictions follow different sets of laws and regulations. If there is doubt whether or not the project is registered at all, interested investors may contact the BrokerCheck system, ran by the Financial Industry Regulatory Authority.
The FBI pointed out that legitimate businesses, including various platforms, projects, exchanges, or crypto ATMs are all required to register in order to conduct their businesses legally. If the project fails to register, it will be targeted by the authorities, whether it is real or fake.
Meanwhile, the FBI’s general stance towards cryptocurrencies mirrors one of the US SEC. Similarly to the regulator, the Bureau believes that most coins are, and should be treated as, securities, even if they are registered as utilities. This is another thing that investors should watch out, at least until the STO trend picks up.
FBI has a large interest in cryptocurrencies
In mid-2018, the FBI revealed that it had around 130 crypto-related cases at the time, mostly due to the misuse of cryptocurrencies for illegal activities. Most of such issues revolve around the use of crypto on the dark web, with the coins being connected to drug sales and similar unlawful actions. Furthermore, the Bureau also had a high number of information requests sent to a particular exchange — Switzerland-based ShapeShift.
However, even with such a large interest in the space, the FBI claims that cryptocurrency-related cases take a smaller portion of their overall activities.
However, the Bureau still believes that the investors should be educated in order to prevent high numbers of scams, which is also an echo of the SEC’s attempts, most of which took place in 2018. While the interest in investing is understandable, the investors should keep in mind that they must always do proper research before investing and that they should never invest more than they can afford to lose.