Welcome to the section of the TydeCoyn portal where we let you in on a little secret – this ICO won’t be paying dividends to investors anytime soon.
Because it’s fake.
Every day in our work at New Brunswick’s Financial and Consumer Services Commission (FCNB), we see a wide variety of different consumer fraud schemes. Some have been around forever, but others are just getting started. With the rise of digital assets and the recent spate of news coverage about blockchain technology, cryptocurrencies (like Bitcoin) and initial coin offerings (ICOs), a new front in online fraud has opened. These new digital products are heavily hyped with little transparency and disclosure. Fraud in this space is sophisticated, and difficult for consumers to sniff out themselves.
That’s why we created a fake ICO concept and website to educate New Brunswick consumers about the all-too-real dangers of participating in online ICOs. A few red flags crop up in fraudulent ICO activity time and time again – we made sure to hide several in the website we made for our TydeCoyn investment opportunity.
Did any of these features on the site make you think twice?
Red Flag: Promising Guaranteed Returns
What You Should Know: Savvy investors know that there is no such thing as a guaranteed return on an investment. That’s the whole point of investing: you assume a measure of risk in exchange for a potential positive return. However, ICO fraudsters take advantage of the general public’s lack of understanding about digital assets and blockchain to promise astronomical returns on any money invested. They use fancy terminology and vague technical speech to lure consumers into a false sense of security, where they make it sound like the impossible is actually possible: no risk, all reward.
Red Flag: Time Pressure to Invest
What You Should Know: Novice investors might mistake the countdown clocks present on many ICO websites as a feature common to many investment opportunities, but this isn’t the case. All investments should be thoroughly researched and vetted before any decisions are made. If someone is trying to rush you into making an investment, odds are that their “opportunity” won’t hold up under increased scrutiny. Check below for some research and tools from FCNB and CSA.
Red Flag: Intentionally Anonymous Transactions and Limited Transparency
What You Should Know: Again, typical investments are based on open information flows on both sides. As an investor, you should be able to directly contact the venture’s management team. It’s not enough to see a head shot on a website – more information is needed to ensure that they are who they say they are. Additional websites, studies, white papers, and industry peer validation can all be used to further research the people behind the investment opportunity. But this openness expectation goes both ways: you should be wary of businesses that only collect limited information about you during the course of any investment transaction. Serious companies need more than an IP address or a digital wallet address to do business with customers.
Additional Information and Educational Tools
- Not sure if an unbelievable ICO investment opportunity might just be too good to be true? You can use FCNB’s “Check Before You Invest” online tool to conduct research on any firm that claims to be registered to sell securities in New Brunswick. All individuals and firms registered with securities regulatory authorities in Canada will show up in a National Registration search.
- If you’re looking for an easily digestible source of information about initial coin offerings, we’d suggest taking a look at our video “Get in the Know About ICOs.” It’s full of handy tips and insider information without being too inaccessible or jargon-heavy.
- We’ve also put together a few infographics that you can share with your friends, your colleagues, your grandmother – anyone that’s interested in cryptocurrencies and ICOs and could use a bit more information about what to expect in the wide world of crypto.
- What is Cryptocurrency? – A more general overview of cryptocurrencies, popular exchanges and the risks that accompany buying and trading crypto assets.