Crypto 101: FINRA Lists Consumer Tips for Detecting ICO Scams

September 07, 2018

Cryptocurrency is an exciting new frontier, but new frontiers can leave you vulnerable to the unknown and susceptible to the biggest pitfalls in the crypto world: ICO scams.

In the past two years, almost $100 million has been stolen in ICO scams. One Chinese company, the Shenzhen Puyin Blockchain Group, stole over $60 million. Blockchain startups Cryptokami and NVO appear to have vanished with $8 million and $12 million respectively.

Of the 902 ICOs that came out in 2017, 46% have failed. Among those, 142 never got their funding; 276 were scams or faded out; and another 113 have either stopped talking about their projects online or lacked adopters to get the project off the ground.

With this in mind, Financial Industry Regulatory Authority (FINRA), a self-regulatory organization that enforces federal securities laws, lists the following tips for consumers and prospective ICO investors in its ongoing series with the Better Business Bureau on digital assets. 

  • Don’t say “yes” to cryptocurrency “stock” purchases from an aggressive cold caller.

  • Be wary of lofty claims or guarantees about an investment, or pushy sales pitches that urge you to “act now.”

  • Check outFINRA BrokerCheck for registration status and relevant information on firms or individuals who tout investment opportunities.

  • Check the SEC’s EDGAR database to find out whether a company files with the SEC. If so, read the reports and verify the information. Also know that SEC registration still doesn’t mean the company is a good investment or that it’s the right investment for you.

  • Be wary of stocks with huge spikes in price. This could signal potential manipulation or fraud.

  • Do your due diligence and find out where a stock is trading, and pay attention to any cautions with the stock. Investigate OTC markets for pump and dumps. Some markets show a stop sign to indicate that a company can’t or won’t provide important information to regulators, exchanges or the OTC Markets, and also a skull and crossbones to warn that the security, company or officer of the company might be involved in a spam campaign.

You can check out the full FINRA article here.

Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any losses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.