The crypto space is booming and the market is recovering from what was dubbed the Crypto Winter but while cryptocurrency and the blockchain have the potential to shape the near future in a positive way, the industry is also plagued by scammers and deceitful websites that fool more and more people with false claims of easy money or “guaranteed” profits.
The U.S. Securities And Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have warned against opportunities that “sound too good to be true”, through SEC’s website for individual investors (Investor.gov).
The two financial watchdogs have said their staff has recently observed investment scams where the perpetrators advertise cryptocurrency trading businesses, investments in proprietary systems or in mining farms and claim to deliver unobtainable profits of 20 – 50% with no risk or at least a negligible one.
After the investors send the money (usually using cryptocurrency such as Bitcoin, Ethereum, Litecoin, etc.), the scammers either stop communicating with the investors altogether or they ask for additional funds to withdraw the fake profits. In reality, the money is quickly sent overseas, making it hard or impossible to get it back. Given the pseudo-anonymity provided by cryptocurrencies, recovering lost coins is even more difficult than recovering fiat currency.
Such a scam was recently uncovered and on the 24th of April 2019, the U.S. Attorney’s Office for the District of Oregon indicted two Nigerian citizens – Onwuemerie Ogor Gift, 24, and Kelvin Usifoh, age unknown – on one count each of conspiracy to commit wire fraud and money laundering and 11 counts of wire fraud.
The two defrauded investors by soliciting Bitcoin investments through various websites and promising returns between 20 and 50%, instant withdrawals and zero risks. According to the indictment, the defendants then told investors to deposit more funds in order to receive the earnings from their initial investments but never returned any of the money. The defendants are affiliated with three websites: wealthcurrency.com, boomcurrency.com, and merrycurrency.com.
The SEC also warns of another scam known as the “advance fee fraud”, which reportedly generates thousands of complaints every year. In this scam, the investor is asked to pay an advance fee in order for a certain deal to go through. The variety of these scams is often limited only by the imagination of the scammers, as they can propose any type of deal to the gullible investor. It can target people who have been scammed already (asking for an advance fee to start money recovery services), it can target people who have deposited/sent money into a trading service, broker or trading robot (the investor is told he made a profit but has to pay a “commission fee” to receive his/her proceeds, etc.
SEC Warning Signs Of Investment Fraud
The SEC urges investors to be on the lookout for the following red flags. You will probably recognize most of these from our own warning articles and our reviews of scam autotrading robots that promise out-of-this-world returns.
“Guaranteed” high returns. Despite what fraudsters try to make you believe, all investments have risks. Any alleged “guaranteed” return should be questioned and should be treated as a major red flag. Of course the same applies to “no risk”, “absolutely safe”, “failproof investment” and similar.
Sounds too good to be true. In most cases, if it sounds too good to be true, it probably isn’t and it’s best to stay away. Pretty straightforward.
The pressure to buy RIGHT NOW. You are probably familiar with this from the hundreds of autotrading robots that we’ve reviewed: most of them have a “Limited Spots” warning on the website, which is meant to make you act right away before you have the change to do some research online and to read a review. It’s always meant to create a false sense of urgency and you shouldn’t fall for this trick.
Complicated jargon and language are difficult to understand. In order to make themselves appear as serious and experienced traders/investors/entrepreneurs, the fraudsters often use complex phrases and words, claiming their technology is highly secret. Sounds familiar? Almost all autotraders claim to be based on some secret algorithm generated by artificial intelligence or something else, equally futuristic. SEC also informs that their language sometimes includes spelling, grammar, and typographical errors, which make the description hard to understand.
Unlicensed sellers. Most of the times, the people trying to sell you the service or product don’t hold the required authorizations to do so. This is yet another issue that we’ve brought to your attention many times, asking you to deal only with regulated, licensed brokers or companies.
Unsolicited offers. Yet another sign of a potential scam is unsolicited communication, meaning that you never asked for an offer yet you still received it on your email or even in the form of a phone call. Investment opportunities that come to you in an unsolicited manner are usually scams, even if the fraudsters appear to be a legitimate business. Often times they use fake names and credentials.
Read The Warning Signs And Stay Safe!
Before making an investment, no matter how small, carefully read all materials provided by the persons you are about to deal with. Check for any of the warning signs and save yourself the trouble of having to chase down your own money because often times, it cannot be recovered, especially when dealing with cryptocurrencies.