Red flag checklist for cryptocurrency Ponzi schemes
| Red flag category | No. | Identified themes (red flags) |
|---|---|---|
| Investment marketing | 12, 25 | The investment is marketed as an “exclusive” opportunity, with an increasing pool of similar investors |
| 31, 36 | Advertising in the form of word-of-mouth, with statements and endorsements from unknown sources | |
| 2, 22 | Claims of little or no risk to the investor | |
| 4, 37 | Unregistered investments in a market where there is little or no regulation for the investment type | |
| 5, 16 | Investment advisors lack professional licenses | |
| 13 | Investment duties and fundraising are intertwined | |
| Statements and payments | 7, 30 | Unconventional or inconsistent account statements that are delayed and prone to errors |
| 18, 42 | Difficulty in tracking invested assets and liquidating investments | |
| 8, 28, 29 | Delays and difficulties in receiving payments, with pressure to instead reinvest earnings and forgo the pay-out | |
| 26, 40 | Pressure to maximise investment funds and customary fee waivers on the investment | |
| Company or perpetrator | 11, 34 | There is little or no history of the company, which one person tightly controls |
| 14, 35 | A lack of details on company processes and procedures and resistance to outside audits | |
| 32 | The perpetrator appears to be charismatic and trustworthy | |
| 19, 27, 38 | The owners, executives or management are found to be living extravagant or lavish lifestyles, considering that the company is relatively new | |
| Returns | 1, 3, 9, 10, 20, 21 | Promises of overly consistent or guaranteed positive returns that are unreasonably high or above market returns |
| 23, 33 | The returns are unrealistic or unproven and could be generated over a short-time period | |
| Investment strategy | 6, 15, 17, 24 | A special or proprietary investment strategy that is vague or lacks transparency is secret or complex |
| 39, 41 | Investments in complex or difficult-to-understand transactions, which appear overly aggressive and where the investment success depends on an individual’s expertise |
| Red flag category | No. | Identified themes (red flags) |
|---|---|---|
| Investment marketing | 12, 25 | The investment is marketed as an “exclusive” opportunity, with an increasing pool of similar investors |
| 31, 36 | Advertising in the form of word-of-mouth, with statements and endorsements from unknown sources | |
| 2, 22 | Claims of little or no risk to the investor | |
| 4, 37 | Unregistered investments in a market where there is little or no regulation for the investment type | |
| 5, 16 | Investment advisors lack professional licenses | |
| 13 | Investment duties and fundraising are intertwined | |
| Statements and payments | 7, 30 | Unconventional or inconsistent account statements that are delayed and prone to errors |
| 18, 42 | Difficulty in tracking invested assets and liquidating investments | |
| 8, 28, 29 | Delays and difficulties in receiving payments, with pressure to instead reinvest earnings and forgo the pay-out | |
| 26, 40 | Pressure to maximise investment funds and customary fee waivers on the investment | |
| Company or perpetrator | 11, 34 | There is little or no history of the company, which one person tightly controls |
| 14, 35 | A lack of details on company processes and procedures and resistance to outside audits | |
| 32 | The perpetrator appears to be charismatic and trustworthy | |
| 19, 27, 38 | The owners, executives or management are found to be living extravagant or lavish lifestyles, considering that the company is relatively new | |
| Returns | 1, 3, 9, 10, 20, 21 | Promises of overly consistent or guaranteed positive returns that are unreasonably high or above market returns |
| 23, 33 | The returns are unrealistic or unproven and could be generated over a short-time period | |
| Investment strategy | 6, 15, 17, 24 | A special or proprietary investment strategy that is vague or lacks transparency is secret or complex |
| 39, 41 | Investments in complex or difficult-to-understand transactions, which appear overly aggressive and where the investment success depends on an individual’s expertise |