421 Fake Cryptocurrencies! China Warns Crypto Pitfalls
May 18, BEIJING – IFCERT, the National Committee of experts on the internet financial security technology, has released a report prepared in partnership with the lab of Ministry of Industry and Information Technology, warning the pitfalls of fake cryptocurrencies, which mainly pose the risks of illegal fundraising, missing executive teams and lead to great loss for investors.
IFCERT, initiated by the country’s Ministry of Industry and Information Technology in a bid to maintain the security of the Internet financial industry, collected experts from the top authorities including Ministry of Industry and Information Technology, Ministry of Public Security, China’s central bank, China Securities Regulatory Commission, etc. Simply, it is an analyzer for the internet watchdogs in the country. Last year, it had released an ICO report and a report related to Chinese bitcoin exchanges.
The report shows that as of April 2018, IFCERT has detected 421 fake cryptocurrencies under continuous monitoring, of which, more than 60% fake coins’ servers are deployed outside the country. In this context, it is hard to find and track the platforms of such fake cryptocurrencies.
The phenomenal growth of cryptocurrencies in these years has attracted millions of investors while also creating opportunities for criminals to take advantage of average investors as well. On the same day, the Wall Street Journal found 271 with red flags including rampant plagiarism, identity theft and promises of improbable returns out of 1,450 cryptocurrency offerings.
The technology platform of IFCERT which monitors these scams concludes three attributes of fake cryptocurrencies:
1. An operation model of pyramid scheme. Recruiting members via a promise of high returns in investing those cryptocurrencies or tokens, and more people will be hoaxed into phony deals by investors already in it.
The reward pattern of a fake cryptocurrency named Digit Coin/DGC
2. Price always increases without falls. It is learnt that fake cryptocurrencies have no open-source code and thus cannot generate any block nor run on any blocks. The more you invest, the more returns you will get. The fraudsters will reward investors tokens based on the amount they hold.
3. Price manipulation. These bogus cannot be traded in crypto exchanges, so they’re usually traded via OTC (over-the counter) transactions, some even build their own trading platforms for the phony deals. In this way, the crypto price could be easily manipulated by those fraudsters. It is easy to create the illusion of rapid price increases, but investors are often unable to trade or withdraw it during those spikes.
A fake cryptocurrency named VBC and its rough exchange Radar China
It marks the latest government effort in educating and advocating the pitfalls of investing in cryptocurrencies. Days ago, the U.S. SEC (Securities and Exchange Commission) made a vivid example by creating HoweyCoin – a fake cryptocurrency to help investors avoid scams.