The end is nigh…for scammers
One of the main things exit scammers exploit is the fact that even with regulations in place, it would be hard for authorities to prove wrongdoing from the founders’ part. They could easily say “we got hacked,” and get off unscathed.
So how can we put an end to this, pinpoint fraudulent activity, and hold those responsible accountable for their actions?
Blockchain Intelligence Group, a company developing tools for policing the crypto market, is working towards bringing security and—most importantly—accountability to cryptocurrency companies and users.
Shone Anstey, president and co-founder of Blockchain Intelligence Group, said there are ways to close in on scammers. And they have the tools to do so.
“It is true that fraudulent individuals can easily register a company, make a website and release what seems to be an official-looking paper, convincing investors and consumers that this is legitimate – even after they participate in an exit scam. Though, better coordination between authorities such as regulators, law enforcement agencies, banks and large online retailers will go a long way in resolving current difficulties.
We have two products, QLUE and BitRank, that can help authorities track the scammers. QLUE’s advanced proprietary search algorithms assist law enforcement to track and investigate suspicious and illegal activity so that they can successfully prosecute these scammers.
BitRank is a proprietary ‘risk-scoring’ tool that investors can use for risk mitigation so users can try and check if ICO wallet address they are sending funds to has been used by a criminal element before a transaction takes place. BitRank also puts the past crimes of the company upfront, further exploiting whether they are an exit scammer or not,” Anstey wrote in an email to CoinGeek.
Scammers beyond borders
Cryptocurrencies are very well known for their ability to break through jurisdictional borders nearly instantly. But while legitimate users benefit from this, so do criminals. Given this fact, the challenge for regulators is also rising.
International Monetary Fund (IMF) Chief Christine Lagarde, in fact, said that enforcement would require international cooperation. Otherwise, it would be futile—something Dutch Minister Wopke Hoekstra also earlier stated.
While this sounds accurate, making it happen is an entirely different challenge altogether. So how would regulators handle the jurisdictional conflicts? For example, if a company in China (or anywhere else) scammed U.S. residents? Anstey breaks down possible ways that regulators can cooperate with each other to crack down on malicious entities.
“Where possible the government will use MLATs (Mutual Legal Assistance Requests). MLATs are used by law enforcement agencies around the world to make official requests,” Anstey said.
“The Chinese government has always been strict about cryptocurrency, as it fears that without government control it is possible cryptocurrency could become an instrument for capital outflow and other illegal activities—such as exit scammers. The SEC is going to continue to safeguard people from investing in various ICO projects all around the world that could lead to scams. Furthermore, on a global level, coordination of KYC and AML protocols between different jurisdictions will be a major step forward, and probably the best way for regulators to handle a scam between two different countries. It’s also likely that the Financial Industry Regulatory Authority issues an ‘investor alert’ like it did in the past, to caution against cryptocurrency investments, possibly suspending shares of certain cryptocurrencies.”
Anstey cites Japan’s model as a good example, and proceeds with a bullet list of questions investors should ask before dumping money on any ICO or token.
“A licensing model similar to Japan’s Virtual Currency Exchange License can be a great help in codifying a range of regulations,” he explains.
“In what ways can new investors be proactive in their successful adoption of cryptocurrency investments? Like with conventional investments, due diligence and education are essential preliminary steps for investors to take. Even more so when dealing with the cryptocurrency and ICO spaces. Regulatory reach remains so sporadic that agencies such as the SEC are still not in a position to protect investors from the kind of pitfalls that accompany ICOs and cryptos. So, investors need to educate themselves as there is no effective third-party that can arbitrate should anything go wrong.
Investors should approach ICOs and cryptos with these questions:
• Does the coin solve a problem that is prescient, as opposed to solving a problem that does not exist?
• Does the coin have a product beyond the White Paper?
• Do the management team members have real identities? Are they contactable independently of the internet? Have they been recycled through various ICO’s
• Are the private keys to your ICO tokens yours to hold?
• If you wish to have a say in the appointment of board members, how much weight does a tokenholding give you, exactly?”
Big growth ahead, under certain conditions
Anstey adds that there are huge potential investments waiting to enter the space. But they will keep holding back until interested investors see solid regulations—and the capacity to actually enforce them.
“A new cohort of businesses and investors are wishing to enter this rapidly evolving space. But they can just as easily decide not to do so if they see an absence of robust regulations. They wish for their investments to be secure and to gain the confidence of their clients who might also become cryptocurrency investors in their own right,” he says.
“A key theme of this requirement for regulation is the ability to police bad actors such as scammers, seeders of ransomware, and dark marketplace operators. New investors do not wish to be tainted by association with these actors.”
He reiterates that it’s in every cryptocurrency investor and enthusiast’s best interest to push for a safer marketplace.
“While it’s exciting to see the rapidly growing adoption of cryptocurrencies across so many markets, cryptocurrencies will only be sustainable and helpful if the marketplace is safe. That’s why we not only work with the financial sector, regulators and the retail sector, but also with law enforcement investigators to bring security and accountability to cryptocurrency across all sectors.”
Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.
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