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Anatomy of a cryptocurrency scam

Friday, February 22, 2019 9:19 AM | Chad Francis (Administrator)

Yesterday, while driving back to Dallas up I-35, I passed a billboard near Hillsboro advertising how I could get rich quick by investing in a new cryptocurrency, one that I'm sure plans to be the next Bitcoin or Litecoin and make all of its initial backers rich beyond belief.

These types of investment opportunities, often called Initial Coin Offerings or ICOs, are popping up everywhere, and they are the subject of a recent article in the Financial Times about the growing number of scams associated with cryptocurrencies.

"Being able to find out the details of a crypto mining company and its management is key to investor due diligence, since the crypto “wild west” is littered with “scams and shenanigans”, said Jonathan Bixby, executive chairman of London-listed Argo Blockchain.

Sophisticated scams include Ponzi schemes that might pay an investor “profits” for the first month, but never again — with the initial payout funded using the sign up fees from new investors."

The article details an example of an advertisement for a cryptocurrency investment that, upon further review and due diligence, was not legitimate.

For both the investing public, and for CFE's assisting in preventing and detecting fraud, it is beneficial to understand the nature of these schemes and how they operate in practice.

The full article can be read here: Financial Times, "Anatomy of a cryptocurrency scam," February 20, 2019, Camilla Hodgson

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