The MFSA has issued a guidance note to the public to address the risks associated with investments in crypto assets. As part of its responsibility towards safeguarding consumer protection, the MFSA is providing useful and easy to read information on crypto-currency investments through this guidance document.   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 in the event that one encounters a scheme of a dubious nature within the crypto-asset sector.

The Guidance note explains that such scams are 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, are followed by a phone call from a friendly and supposedly expert sales person whose aim is to convince victims to invest money in their scheme.

The document also outlines the most common types of cryptocurrency scams which investors need to be vigilant about. These include (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.

In order to establish whether a scheme is in fact a scam, it is recommended that one goes through the checklist of the 11 most common warning signs, these being:

1. Unrealistically high rates of return which are usually higher than the market average;
2. Easy withdrawals which may be made at ‘anytime’;
3. Promises that any funds deposited are 100% guaranteed;
4. The business being unregulated;
5. Lack of documentation or the use of documentation which is copied from a legitimate business;
6. Aggressive selling techniques which put pressure and rush you to secure a sale;
7. The absence of physical local offices;
8. Contradiction between documents and spoken information;
9. Not answering and avoiding hard questions;
10. lack of information being provided on the website, or within the whitepaper;
11. 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 first step is to check whether the company is regulated, and the veracity of such a claim, by confirming with the Authority’s Financial Services Register online. When in doubt, consumers are welcome to get in touch with the MFSA via email or through www.mfsa.mt.

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!