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It is no doubt that ICOs and cryptocurrencies bring with them both the good and the bad. As ICOs and cryptocurrencies continue to spread across different use cases, so does their potential of being exploited for fraudulent activities. Unfortunately, this economy seems to be a fertile soil for cybercriminals and other financial criminals to breed on.
In an exclusive interview published by the news outlet The Paypers, the FBI was able to shed some light on fraudulent ICOs. The interviewed FBI investigators talked at length on how to identify scam ICOs and provided useful advice for investors looking to dip their toes into this new pioneering financial industry.
Elaborating on how to identify fake ICOs, the FBI investigators stated that fraudulent ICOs operate in virtually the same manner as other fraudulent investment schemes. They are all characterized by misrepresentations: typically, they all involve misrepresentation of the principal’s experience, exaggerated expected rate of return on investment, and over-hyping the industry’s interest in the ICOs.
Consequently, they advised crypto investors and enthusiasts to pay keen attention to the principals of any entity before investing in it. Potential investors were also advised to confirm the physical location and the laws governing such entity before dishing out their hard-earned cash. In addition, they stressed that potential investors should be aware of the risks associated with dealing with ICOs and cryptocurrencies before delving into the market.
Commenting on how the FBI track down scammers and halt scams related to ICOs and cryptocurrency, they stated that the FBI work closely with regulatory agencies such as the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). Collaborating with these agencies together with FBI source base, industry outreach, and research teams, they are able to sniff out these scams before anyone gets victimized. They also added that the FBI has a team of experts who are versed in virtual currencies and securities, not to mention their sophisticated tools and devices designed to track and extinguish virtual currency based schemes and the individuals behind the scene.
Although active efforts are being employed to diminish these scams, it is sad to know that both US citizens and foreign citizens still fall prey to these fraudulent schemes. However, the investigators asserted that the FBI and other security agencies and regulators will continue their efforts to mitigate these threats and bring the perpetrators to justice in due time.
Nonetheless, they stated clearly that the first line of defence against such fraudulent schemes is investor’s knowledge of the risk. Be guided!