U.S FBI Shows How To Identify Fraudulent ICOs

Wilfred Michael 

Wilfred Michael

News reporter

19 February 2019,
U.S FBI Shows How To Identify Fraudulent ICOs

The steady increase in the number of fraudulent Initial Coin Offerings (ICOs) targeting U.S residents has prompted the Federal Investigation Bureau (FBI) to reveal key features that investors must consider before putting money into an ICO.

In an interview shared with Paypers, the financial watchdog outlined that the following loopholes are common with fake ICOs —

  • Misrepresentation of the working experience possessed by project directors

  • Misrepresentation of project achievements and expertise as well as the level of industry interest in its activities.

  • The project’s cryptocurrency usually offered to investors promise a high interest and returns rate within a short period.

  • The fraudulent ICO would often have no real physical office location rather than a P.O box or the registered address of an agent.

To mitigate these risks, the FBI advised potential ICO investors to  —

  • Verify the physical location of projects and what local laws apply in the region where it operates.

  • Utilize the FBI’s Financial Industry Regulatory Authority’s BrokerCheck to confirm the location of projects.

  • Avoid investing in projects that seem are mainly internet-based with little or no links to the offline world.

  • Guard against projects that promise unusually high returns. They should also invest only when they are willing to lose.

Additionally, the FBI said they employed a team of experts to fish out fraudulent ICOs before they even go live, thus, ensuring more protection for investors.

Regarding the expected surge in the number of security token offerings, the FBI has said it would label as “security” token anything the U.S SEC deemed fit. However, they reckoned that they would adopt the same strict stance when monitoring the new fundraising model.

The FBI’s effort to reduce the impact of cryptocurrency-related crimes on the U.S populace perfectly complements that made by regulators in other parts of the world.

In recent times, Stmarket.co have reported the shutdown and red-flagging of several fake ICOs by regulatory bodies in Belgium, Italy, and Singapore.


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