The New Zealand police have warned the public against investing in Bitcoin scams that promise massive profits in bitcoins and other cryptocurrencies.
The warning was issued after it was reported an investor lost the equivalence of $212,500 to a cryptocurrency based scam. The police in Canterbury New Zealand said that the scheme in question involves solicitation of funds in digital currency while promising the would-be victims massive profits.
In the statement, the police said that the public will do well to be wary of any online investment schemes that promise astronomical return on investments.
Although details of the scam were not revealed, Senior Sergeant Paul Reeves who issued the release said,
“Members of the public should seek advice before making any online investments they are unsure of. Scammers are extremely persistent and can seem very credible, as they are highly versed in their trade.”
The police explained that some investors actually had their investments increased in the scheme for some time as money flowed into the system. The funds eventually started dwindling.
It is now apparent that scammers are developing more schemes that fit the scenario of the crypto industry as they strive to convince the public that they can make money by parting with their digital currencies.
It is a known fact that pyramid schemes and high yield investment programs are unsustainable because the supply of new entrants bringing funds to pay older investors is not inexhaustible. What usually happens is that older investors are paid by new ones. The founders of the scheme make the most money but when the supply of new investors ceases, the scheme collapses.
The Canterbury police redirected the public to a crypto advisory board, CERT which is the cyber security agency of the country. The board has instructions on how to approach cryptocurrency investments taking cognizance of the risks involved.
These risks are mainly the volatility associated with digital coins, the possibility of hackers stealing them, loss of private keys and the exposure to scams.
The Board has warned investors in crypto currency to store their coins in offline wallet or the so-called cold storage. This way, their investment would be secured from hackers.
Presently, cryptocurrencies are still unregulated in New Zealand. The country’s financial market regulator, FMA had last year announced that it considered digital tokens to be securities. This was at a time the crypto industry was in boom and regulators in many countries compelled to take stand on its classification.
Unfortunately, among the bugging problems of the budding industry is the incidents of Bitcoin scams and those related to altcoins and initial coin offerings. Investors have already lost millions of dollars as undesirable elements take advantage of the unregulated crypto space.