Making A List And Checking It Twice: The FBI Highlights Key Features In ICO Scams

February 20, 2019 12:25 AM

While some work to improve the muddled wasteland that is the initial coin offering (ICO), and others believe the more transparent security token offering (STO) is set to take over, the FBI hopes, at the very least, you’ll just be careful with your money. In a recent interview with Netherlands-based financial news site The Paypers, Steven M. D’Antuono, section chief of the FBI’s financial crimes section within the criminal investigative division, outlined the Bureau’s list of key features in ICO scams and what tools investors can use to protect themselves.

While D’Antuono notes that most ICO fraud schemes vary from case to case, he does believe there are common threads between each scam. D’Antuono’s list of consistent ICO scam traits is threefold: The ICO scammer will usually misrepresent their experience in the industry, they will misrepresent how much interest their ICO has managed to garner, and the returns will most likely be guaranteed.

The list of traits is very similar to a warning recently published by the Financial Conduct Authority (FCA), a financial regulatory agency in the UK. That warning, which highlights the losses in investment scams suffered throughout 2018, states that investors should be vigilant of scams pushing unrealistic returns that sound too good to be true, as well as fake reviews that detail how many people want to or have invested.

To remain safe and avoid potential scam ICOs, D’Antuono believes that investors should find out the physical location of the entity looking for ICO investors. At the very least, this will inform investors which laws and regulation they should be cognizant of before investing. D’Antuono recommends that investors should stay away from ICOs that appear to be wholly online, a sentiment also echoed by the FCA’s warning that found scammers are moving to social media or other online outlets to contact investors. Investors can also use the Financial Industry Regulatory Authority’s BrokerCheck system to check the background and registration of any individual recommending an investment of any kind, not just ICOs.

D’Antuono also mentioned the work the FBI has done with the Securities and Exchange Commission (SEC) to educate investors on potential ICO scams. Last year, ETHNews covered the SEC’s mock ICO aimed at helping investors deduce whether an investment opportunity is legitimate or a scam. Billed as the HoweyCoin – in reference to the Howey Test – the fake ICO presented a series of red flags, including guaranteed returns, celebrity endorsements, and claims of SEC compliance.

As far as where the FBI stands on STOs taking over for ICOs, D’Antuono doesn’t seem to believe a possible shift in investment platforms is going to make the cryptosphere any less muddied. “The more tokens there are,” he quips, “the more risk there is for fraud.”

Nicholas Ruggieri studied English with an emphasis in creative writing at the University of Nevada, Reno. When he’s not quoting Vines at anyone who’s willing to listen, you’ll find him listening to too many podcasts, reading too many books, and crocheting too many sweaters for his dogs, RT and Peterman.

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