The National Committee of Experts on the Internet Financial Security Technology (IFCERT) started by the Ministry of Industry and IT of China has tracked down 421 “fake” cryptocurrencies, 60% of which were run by overseas servers making their detection difficult. IFCERT has been specially created by the country to keep an eye on the discrepancies in cryptocurrency dealings and so-called “fake” virtual currencies.
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Committee Says Investors Face Major Losses Due To Fake Cryptos
IFCERT warned crypto investors about the dangers and frauds taking place in the crypto space and also explained the three features that can enable an investor to detect the profiles of fraudulent digital currencies. According to the Chinese national committee of internet financial security experts, virtual currencies such as Bitcoin (BTC), Litecoin (LTC), and Ethereum (ETH) have been getting a lot of attention, and because of this, some criminals are taking advantage of it and are engaged in pyramid schemes or financial fraud under the cover of digital currency trading. The committee stated that investors frequently suffer major losses due to fake cryptocurrencies.
Three Key Features Of A Fraud Crypto
The committee of China has come out with three key features that can help the investors track down a fraudulent digital currency. The first feature is that such cryptocurrencies rely on pyramid schemes. This is a type of network scheme in which the fraudster says that the investor will only make money if he brings others in on the network.
The second feature listed by IFCERT is the absence of an open-source code of the fake digital asset. It makes cheating easier for the creators who build-up an illusion of skyrocketing growth. The impression of highly multiplied reward is created by splitting the tokens artificially. These fraudsters do not have a real code because they either cannot generate blocks for creating a code or lack blockchain entirely. But these fraudsters lure the investors by saying that their wealth will increase with the increase in the number of tokens.
IFCERT gave a third and final key feature for identifying the fraudsters according to which these people mostly trade through over-the-counter deals as the bogus coins cannot be traded on legitimate crypto exchanges where all dealings are transparent.
