The United States Federal Bureau of Investigation (FBI), known for working on high-profile crimes, acts of terrorism, and other threats to the public, has recently outlined what they believe is the key to avoiding fraudulent initial coin offerings (ICOs).
On February 19, the investigative national security organization shared these insights in an exclusive interview with the Netherlands-based financial news site The Paypers.
Key Strategies of Scam ICOs, According to the FBI
Per the interview, the FBI said scam ICOs follow the same tactics as most fraudulent investment vehicles, stating:
“Similar to most fraudulent investment vehicles, individual(s) conducting fraudulent initial coin offerings misrepresent either their ability or intention to fulfill the promised security, and/or the probability of projected returns that the investment will generate.”
Adding to this, they said a scam ICO’s key strategies include the misrepresentation of the director (project lead) performance, a false or skewed impression of how much traction the ICO is receiving, and unrealistic misrepresentations of the token’s probable rate of return.
As put by the FBI:
“Like any investment product, rates of return can never be guaranteed and if it sounds too good to be true, it probably is.”
FBI Tips to Avoid Scam ICOs
In addition to shining light on the key strategies of scam ICOs, the FBI also provided some useful tips to help investors avoid fraudulent ICOs. Per the FBI interview, investors should be on the lookout for entities that appear to be exclusively internet based, with no real physical address.
They also urged investors to be aware as to which jurisdiction the ICO is registered in, if it’s even registered at all, and know which laws and regulations the ICO will be subject to.
The Financial Industry Regulatory Authority’s BrokerCheck system is a resource for verifying the identity and registration status of entities. Moreover, the FBI urges investors to never invest more than they can afford to lose, and to conduct due diligence on any ICO and the individuals behind it.
The fact that the FBI has thoroughly investigated fraudulent ICOs and warned the public about them is a sign that scam ICOs are unlikely to go away. Therefore, cryptocurrency investors must remain vigilant while investing in this industry.
Have you ever been scammed when investing in an ICO? Will the next bull run give birth to more scam ICOs? Let us know what you think in the comment section below.