China Has Found 421 Fake Cryptocurrencies

A Chinese government-backed industry organization has published a report on fake cryptocurrencies. As of April, its monitoring platform has found 421 fake cryptocurrencies, 60% of which are deployed overseas. The Committee has also outlined major red flags of these cryptocurrencies.

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421 Fake Cryptocurrencies

The National Committee of Experts on the Internet Financial Security Technology (IFCERT), a Chinese government-backed industry organization, published the results of its analysis on fake cryptocurrencies on Friday.

Citing that “In recent years, virtual currencies represented by bitcoin, litecoin, ethereum, etc. have received continuous attention,” IFCERT pointed out that “some criminals are engaged in financial fraud or pyramid schemes under the cover of virtual currency.” The Committee added that fake cryptocurrencies frequently appear, “causing investors to suffer major losses.”

IFCERT’s National Internet Financial Risk Analysis Technology Platform continuously monitors fake cryptos, the Committee detailed, adding (as translated by 8btc):

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 Red Flags

The Committee outlined some major red flags of these fake cryptocurrencies. Firstly, they adopt “pyramid-based” business models, claiming that their cryptocurrencies will generate high returns.

Secondly, they have no real code, IFCERT described, noting that they either do not have a blockchain or cannot generate blocks for one.

Thirdly, they will not be traded on legitimate cryptocurrency exchanges, “so they often trade on over-the-counter or proprietary exchanges,” the report detailed, adding that:

There is a phenomenon that prices [on these platforms] are highly controlled by institutions or individuals, which tends to cause the illusion of rapid price increase. However, users often cannot conduct transactions or withdraw cash.

IFCERT emphasized that fake cryptocurrencies have no value and are illegal, asserting that “Many of these platforms do not have business premises and business information, and servers are often deployed overseas,” so it will be difficult to recoup any losses for victims.

271 Fake ICOs

On Thursday, the Wall Street Journal independently published its finding after a review of documents produced for 1,450 initial coin offerings (ICOs). The publication “has found 271 with red flags that include plagiarized investor documents, promises of guaranteed returns and missing or fake executive teams.”

Investors have poured more than $1 billion into these 271 ICOs, the publication detailed, adding that “some of the firms are still raising funds, while others have shut down. Investors have so far claimed losses of up to $273 million in these projects, according to lawsuits and regulatory actions.”

Do you think there are many more fake cryptocurrencies? Let us know in the comments section below.

Images courtesy of Shutterstock and IFCERT.

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