25.03.2019

Ukrainians have already lost hundreds of millions UAH in quasi-financial projects founded by the fraudsters in “grey areas” of capital markets which are free from regulation and any guarantees of complying with the rights of the investor and participants’ liability. Such areas have arisen due to the delays in improving financial legislation and include, in particular, Forex trading, cryptoassets, binaries, investing in financial instruments, assets management in capital markets etc.   

The NSSMC  informs investors about 10 signs of fictitious investment project or financial transactions. The presence of at least a few of them should already be a reason for the investor to be more meticulous in the analysis of advertising promises and to be more careful in investing their money.  

The warning was issued based on the analysis of existing and already suspended dubious projects.

The sighs which make it possible to identify potentially fraudulent projects are the following:

  1. large percentage of guaranteed profitability;

The main sign of scam projects is the suggestion of overprofits which are often many times higher than the average interest rate of banks on deposits. Some projects offer the yield of 100% or more per annum, while the algorithm of using money and the logic of earnings are extremely vaguely described.

  1. absence of the relevant permits and licenses;

Typically, the project does not have any official regulatory permits and licenses on carrying out activities related to providing financial services, assets management or other services in capital markets in the country where it attracts funds. Sometimes the “licenses” of foreign dubious organizations or exotic countries are presented to the investor.

  1. aggressive marketing;

Most of scam projects need aggressive advertising support. Typically, advertising campaigns are implemented on the Internet. Large-scale, bright and promising it is usually based only on emotional motives rather than on rational arguments. The large number of positive reviews on the company’s website, the recommendations of famous bloggers and media people or even a network of related “partner” websites in other jurisdictions should not reassure you.

  1. absence of a physical office;

The availability of exclusively online communication, the absence of a physical office in the city or country where the project offers services. The lack of identified employees with professional history who are responsible for the management of investors’ funds. Concluding agreements without physical presence, personal or electronic signature and verification of documents. The absence of a functional back-office such as the legal department, accounting, related services.

  1. no registration in the country of attracting investments;

The lack of legal registration of a person or project in the country of attracting investments. The contact legal entities or beneficiaries are typically the residents of such countries as Seychelles, UAE, British Virgin Islands, Saint Vincent and the Grenadines, the Republic of Vanuatu, countries with offshore zones, preferential customs or registration conditions.

  1. no investor’s accreditation;

Typically, there is no any checking of the financial condition of the investor, his credit history. The projects are not interested in the financial capabilities of the investor, his resources, they are ready to work even with low-income clients offering them loans on bondage terms.

  1. suspicious or unverified biographies of the managers;

Closed information about the actual project managers, about those responsible for the legal, financial, accounting support of the project. Vague and legally unclear job titles of the nominal managers, who appear in advertising materials. The absence of confirmed professional history of such people. The presence of facts or implemented projects which cannot be confirmed from the previous activities of top managers. The public figures who may present themselves as the leaders of such projects in fact can turn out to be the hired actors who are not involved in the management process in any way.

  1. lack of signed documents;

Under Ukrainian law, the conclusion of financial agreements requires the personification of the signatories, the personal signature of papers, the presence of such documents in several copies physically signed by both parties of the agreement or signed with an electronic digital signature.

  1. insistent offer to involve friends;

An offer to the investor to involve friends, relatives and acquaintances in the investments is a common practice of scam projects. Dubious projects develop and suggest a detailed program of getting additional bonuses and income in case the investor involves new people in the project, for example, by connection by means of the referral key.

  1. concealment of property rights.

The lack of any documents that can confirm a person’s ownership of the assets or their share in which the scam project theoretically invests. The absence of systematic reports on operations, activities, results in the investor’s assets project management.

The NSSMC urges the investors to be especially attentive and careful about investing in such a project if there are at least a few of such signs. The best thing to do is to make additional checks to ensure the reliability of the project or abandon such investments altogether.

Also, you can always make appropriate inquiries to the financial regulators that will provide the relevant opinion or information within their responsibilities.       

There is a feedback form for contacting the NSSMC on the main page of the website: https://www.nssmc.gov.ua/

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