Commission sets up fake cryptocurrency investment to educate New Brunswickers03 December 2018
SAINT JOHN (GNB) – Some people interested in investing in New Brunswick’s coastline received more of an education than they were bargaining for when they clicked on a fake investment scheme that was designed to raise awareness about the risks of cryptocurrencies and frauds.
As part of Investor Education Month in October, the Financial and Consumer Services Commission created TydeCoyn.ca, a fake website hyping a too-good-to-be-true investment opportunity. Anyone who clicked on the “invest now” or “get more information” links were led to the commission’s education and fraud awareness resources.
There has been a rise in cryptocurrencies, which has led to an emerging form of Initial Coin Offerings (ICO) fundraising, which is similar to crowdfunding. ICOs are becoming popular among business start-ups to get investors to buy into an idea in exchange for digital tokens or coins.
“This website was developed to educate New Brunswick consumers about the all-too-real dangers of participating in ICOs,” said Erin King, the commission’s senior education and website officer. “Investors may be promised high potential returns, but the reality is that participating in an ICO is very risky. We want investors to consider the risks as well as the opportunities when considering digital assets.”
ICOs have become a fertile ground for fraudsters, who are pretending to be involved in blockchain technology, ICOs and cryptocurrencies to scam investors. Fraudsters can easily build an attractive website and load it with language to lure investors into a phony deal. The TydeCoyn website was built to include many of the classic warning signs of fraud, including vague testimonials, promises of guaranteed returns, and a countdown clock to show time is running out.
Interested investors should be aware that there is a very high risk of failure for ICOs. If the business does not successfully complete the project, the coins or tokens it issued may have no use, or value, at all. Investors need to be asking critical questions to ensure the opportunity is in fact legitimate and that it is the right investment for their needs.
“Unlike an initial public offering (IPO), most ICOs are made without following formal disclosure requirements,” said King. “As a result, it is often difficult to find out who is behind the ICO and how the money raised will be spent. Interested investors should not participate unless they are emotionally and financially able to assume the risk of losing their entire investment.”
Investor Education Month is a national initiative, held in October, that aims to highlight the importance of investor education and provide Canadians with helpful information on investing. The Financial and Consumer Services Commission website has many articles and other tools for investors regarding digital assets.
The commission has the mandate to protect consumers and enhance public confidence in the financial and consumer marketplace through the provision of regulatory and educational services. It is responsible for the administration and enforcement of provincial legislation regulating mortgage brokers, payday lenders, real estate, securities, insurance, pensions, credit unions, trust and loan companies, co-operatives, and a wide range of other consumer legislation. It is an independent Crown corporation funded by the regulatory fees and assessments paid by the regulated sectors. Educational tools and resources are available online.