ICOs are highly notorious and attract multiple fraudsters willing to steal your money. Is there a way to recognize them at a glance? The Federal Bureau of Investigation (FBI) gives a hint.
In an interview with the Netherlands-based financial news site the Paypers, representatives of the FBI explained what to look out for. Number one: the team’s expertise. Usually, dodgy ICOs feature directors, CEOs or the like whose professional experience is misrepresented at best. Number two: ICO’s attractiveness. If an ICO ad contains lines that suggest that this coin is everything the industry has been waiting for, you better think twice. Number three: the returns are extremely high-yielding. Investing $1 and returning $1000 is everyone’s dream but it never really comes true. FBI representatives note:
“Like any investment product, rates of return can never be guaranteed and if it sounds too good to be true, it probably is.”
What to do?
Above all, it is necessary to carry out due diligence, i.e. do meticulous research. Pay attention to details, for example, the ICO’s address. If an entity exists online only and does not have a physical location, you need to be alert, according to the FBI.
Besides, the Bureau recommends inspecting how ICO complies with the law and which one it is subject to. Take a look at which jurisdiction it falls under. This way you will find out which court will deal with the matter should there be a law case.
The FBI also advises checking the information with the Financial Industry Regulatory Authority’s BrokerCheck. This way, you will be able to verify the identities and registration status of entities.
In the meanwhile, the FBI is taking its own measures to combat ICOs fraud. Here is how:
the FBI has many employees versed in virtual currency and securities as well as multiple initiatives aimed at tracking and extinguishing virtual currency based schemes and the individuals that perpetrate them. We also work extremely close with our regulatory agency partners at the US Securities and Exchange Commission (SEC) and the US Commodity Futures Trading Commission (CFTC)
FBI echoes SEC
In the interview, FBI representatives also mentioned that they largely agree that token offerings should be classified as securities. The Bureau did, however, emphasize that “the regulatory landscape for cryptocurrencies is extremely muddy, but as a law enforcement agency, such a distinction has no bearing on our investigations of fraudulent offerings.”
This approach partially echoes the Security and Exchange Commission’s stance. To remind, the Commission still deems most of the coins securities. Exceptions include Bitcoin and Ethereum.
The FBI also commented on a recent comprehensive report which investigates how BTC ATMs are used for money laundering purposes. The Bureau made it clear that all business operators of platforms such as virtual currency exchanges or cryptocurrency ATMs require registration. Otherwise, it is a violation of federal money transmitting laws.
Back in June 2018, the FBI revealed that it was examining 130 crypto-related cases. However, the sector, according to the Bureau accounts for merely “a small sliver” of the FBI’s activities overall. Europol, another agency of a similar kind, also expressed concern over cryptocurrencies last summer.
Fraudulent ICOs have become prolific in the world of crypto. For example, in October the SEC, which has long been concerned with ICOs, shut down Blockvest’s ICO. Concurrently, investors in FLik coin have taken its evangelist, rapper T.I., to court. He is accused of carrying out a scam ICO and more.