In response to the almost P1 billion lost in cryptocurrency scam, the Securities and Exchange Commission (SEC) has released an advisory on how to spot online cryptocurrency Ponzi schemes.
Here’s a rundown of the advisory along with our tips on how to spot and avoid cryptocurrency scams from miles away:
The company and its investment offers are not registered with the SEC
What you can do: Check if the company is registered here. If the page is not working, contact the SEC and ask if the company is registered. Don’t be afraid to ask and don’t scrimp on your effort.
It sounds like a pyramid scam or Ponzi scheme
What it is: Ponzi scheme and pyramid scams are a fraudulent investing scam that depends on money from new investors to pay existing investors and promises high rates of return at little to no risk to investors. Both scams depend on using new investors’ funds to pay the people who invested earlier, so once the new money dries up, the new investors will bear the full brunt of the scheme since the scammers won’t be able to pay all the old and new investors what they’ve been promised.
What you can do: Don’t hesitate to ask about the company’s business model to find out how they are generating revenue from the investment.
A guaranteed promise of high and consistent return in a short period of time
What it is: Investing in crypto does not guarantee a high return, if at all, since the value of the cryptocurrencies tend to go up and down due to many factors. Precisely due to this volatility that no one can predict the outcome of the investment and will result in varying returns.
Little or no financial risk claims
What it is: All investment is a risky endeavor and only a scammer would promise otherwise.
What you can do: If you’ve been promised as such, there’s only one thing that a sane person should do: run away fast! A person who does not have any intention to swindle out of your money would never claim that investment is anything but a risky endeavor.
You felt pressured to invest now
What it is: Scammers are good at creating a false sense of urgency to entice unsuspecting victims to invest now or missed out on an otherwise good opportunity.
What you can do: Don’t be fooled by this gimmick. Think before giving your money away. After all, it’s your hard-earned cash, so you should not be hard-pressed on making urgent decision.
Information about the company and its team are scarce
What it is: Legit SEC-registered companies will not be stingy with their information, which should be readily accessible by the public.
What you can do: Google, my friend, is your best ally. Scour the Internet diligently but don’t be too complacent because some good schemers can lay out a good trap by making a believable website to build their non-existing credibility. Never be afraid to ask people from the forum, Facebook, and social media group to know more about the company and what they’re offering.
Lack of official paperwork for their investment
What it is: Investment companies should be able to provide concrete reporting system and statements to you regularly.
What you can do: Ask if there are any obscure and complex details in the paperwork provided to you. Don’t stop until you’ve checked all the details thoroughly.
Lastly, if it’s too good to be true, then it probably is. So before you decide to invest your money, do due diligence and proceed with extreme caution. Finally, only invest what you can afford to lose.
Have you ever experienced being offered to invest your money in crypto by a shady person? Let us know by leaving a comment in the comment section below.