MFSA warns against crypto scams, offers guidance

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Last Updated on Thursday, 2 May, 2019 at 8:33 am by Christian Keszthelyi

The Malta Financial Services Authority (MFSA) once again warned the public about the possible dangers and risks related to cryptocurrency investments and published a set of guidelines to aid the public with staying safe in the world of novelty technology when making investments.

“As part of its responsibility toward safeguarding consumer protection, the MFSA is providing useful and easy-to-read information on cryptocurrency investments,” the watchdog says in the public note they published on their website. In addition to numerous warnings the authority has already issued, it is committed to “further educating the public on how to identify and avoid scams, as well as the actions recommended in the event that one encounters a scheme of a dubious nature within the crypto asset sector,” the public note adds.

The MFSA says that scams are highly likely to be advertised online, with the use of “clickbait titles” to attract unsuspicious investors. The authority adds that some websites will ask for personal details, which can often be followed up by a phone pitch by a “friendly and supposedly expert salesperson whose aim is to convince victims to invest money in their scheme,” the MFSA says.

The authority says that the most common types of cryptocurrency scams include fake initial coin offerings (ICOs) and crowdfunding ventures promising high yields in short term; eventually leading to platforms closing down and operators disappearing in an impromptu manner with the investor’s money. The watchdog also warns about fake exchange platforms and fake crypto wallet applications.

The MFSA has compiled the following 11-item checklist to help investors establish whether a proposed investment scheme can be trusted or not.

  • 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 are advised to proceed with caution and always make the necessary find-outs about the company,” the watchdog says. MFSA encourages users to check whether the company is regulated, which can be verified in the authority’s online Financial Services Register. When in doubt, consumers are welcome to get in touch with the MFSA via email or through their website.

“Consumers are also urged not to be fooled by the sensation of trust which these illegitimate platforms so often allude to. More importantly, one should take heed of the advice: if it seems too good to be true, it probably is,” the MFSA concludes.

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