MFSA warns, guides consumers on crypto-currency scams
Educates public on how to avoid such scams
The MFSA has issued a guidance note to the public to address the risks associated with investments in crypto assets.
Through the guidance document, the authority is providing useful and easy to read information on crypto-currency investments.
The authority has already issued a number of warnings specifically related to fraudulent crypto-asset investments in 2019.
It is now further educating the public on how to identify and avoid scams, as well the actions recommended if one encountered a scheme of a dubious nature within the crypto-asset sector.
The guidance note explains that such scams were highly likely to be advertised online, with the use of clickbait titles to attract users and make them fall into their trap.
Some of the illicit websites might request personal details, which, when provided, were followed by a phone call from a friendly and supposedly expert sales person whose aim was to convince victims to invest money in their scheme.
The document outlines the most common types of cryptocurrency scams which investors need to be vigilant about.
(a) fake ICOs (Initial Coin Offerings), which can only be used on the platform provided, and whose platforms may eventually be closed and disappear along with the investor’s money
(b) crowdfunding ventures promising higher gains which are availed of once the coin becomes active
(c) fake exchange platforms and fake e-wallet apps.
To establish whether a scheme was a scam, it was recommended that one went through the checklist of the 11 most common warning signs, these being:
- Unrealistically high rates of return which are usually higher than the market average;
- Easy withdrawals which may be made at ‘anytime’;
- Promises that any funds deposited are 100% guaranteed;
- The business being unregulated;
- Lack of documentation or the use of documentation which is copied from a legitimate business;
- Aggressive selling techniques which put pressure and rush you to secure a sale;
- The absence of physical local offices;
- Contradiction between documents and spoken information;
- Not answering and avoiding hard questions;
- lack of information being provided on the website, or within the whitepaper;
- the use of buzz words such as ‘no risks’, ‘gains guaranteed’, ‘become a billionaire’, ‘free services just register’.
When investing, consumers of financial services were advised to proceed with caution and always make the necessary research about the company.
The first step was to check whether the company was regulated and the veracity of claims through the authority’s Financial Services Register online.
When in doubt, consumers could also contact the MFSA via email or through www.mfsa.com.mt .
Consumers were also urged not to be fooled by the sensation of trust which such illegitimate platforms often alluded to.
It said that if something seemed too good to be true, it probably was.