FBI Discovers Multiple Signs to Indicate an ICO Crypto Scam, Issues Warning for New Token Investors


Over the last couple of years, initial coin offerings (ICOs) have grown in popularity. However, as they have grown, scammers have used them as a way to profit as well, providing fake ICOs to collect millions of dollars before they get out of the market. As the United States’ Federal Bureau of Investigation (FBI) has researched further into the actions of these criminals, they have been able to narrow down a few of the attributes that most likely indicate that the ICO is fraudulent.

Some of the issues that the FBI pointed out that investors should look for are:

  • Feigning the professional experience of their directors and executives
  • Wrongfully stating the traction that the ICO has already gained
  • Bombastic promises of massive returns with small token investments

Speaking on the latter, the FBI commented,

“Like any investment product, rates of return can never be guaranteed and if it sounds too good to be true, it probably is.”

Anyone that aims to invest in an ICO or any other fundraising activity in the crypto industry needs to research and find out the people behind the project. If the physical address is hard to find, or the contact information leads nowhere, that may be a sign that the ICO itself is not going anywhere either. Another important aspect is to figure out the location it resides in for the purpose of learning the regulatory atmosphere, ensuring that they follow local laws.

The Financial Industry Regulatory Authority’s BrokerCheck system can be used to verify the details of the company, like the founder’s identities and registration status. Considering that the recent report published by the FBI is not an all-inclusive or even guaranteed list that will show an investor what is real, it is important that investors put in no more crypto or cash than they can afford to lose.

The operators of any platform are required to register the business, according to both Financial Crimes Enforcement Network and multiple Federal District Courts. Without registration, the company is already in violation of federal money transmitting laws, which is a sign not to trust their ICO anyway.

Much of the opinion of the FBI shares the stance that the U.S. Securities and Exchange Commission (SEC) has heled all along – that token offering should be considered securities. Considering this potential new status, there are plenty of platforms preparing for the trend of security token offerings (STOs) instead, and investors should be cautious about where they are willing to put their money.

In June last year, the FBI revealed that there were 130 cases that were still undergoing investigation and research for crypto-related incidents. One of the biggest concerns was that of dark web drug sales. Still, even with the amount of research going into this topic, it was only a “small sliver” of the overall actions of the FBI in 2018.

The SEC tried to help investors learn what they should watch out for with ICOs last year with a mock website that falsely advertised a

“too good to be true investment opportunity.”

They included all of the red flags that consumers need to watch out for, and any investor that tried to purchase the fake tokens without paying attention would be redirected to an educational website about ICOs, cryptocurrency, and related topics.

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