Zooming in on cryptocurrency


  • Nation
  • Tuesday, 09 Jul 2019

PETALING JAYA: As the digital currency market expands, scammers are zooming in to cash in, say experts.

Wong Sue Wan, who is from legal firm Wong and Partners of Baker McKenzie International, said the cryptocurrency market was “flooded with scams”.

“Scams continue to plague the cryptocurrency world when it was identified that Bitcoin investors in Singapore lost at least S$78,000 (RM238,000) between September and November 2018.

“In most of the crypto scams, scammers prey on unsophisticated retail investors, who often assume financial risks which they do not understand,” said Wong, a partner in the corporate, commercial and securities practice of the firm.

According to information re­­leased by the Securities Commis­sion (SC), there is an increase in the number of public complaints regarding Initial Coin Offering (ICO). ICO is a means for companies to get funding by issuing a new type of digital coin or token.

Companies will attract investors to buy their specific token with cash or other pre-existing digital currency, in exchange for potential returns. It is similar to an Initial Public Offering (IPO) but investors buy shares, and a business has to abide by stringent disclosure requirements before being listed.

Wong said many ICO projects used “lavish” and professional-looking websites, which made it difficult for investors to differentiate bet­ween scams and legitimate projects.

She said as ICOs were currently not regulated by the SC, there were a higher risk and exposure to fraud and cybersecurity risks such as personal data theft.

“Investors should also be mindful that an ICO investment, even if it has a legitimate purpose, may not realise an immediate economic gain. “The unpredictable length of the project’s implementation period is a risk that investors should bear in mind,” she said.

The SC recently stated that it did not authorise any ICO, acknowledging there was an increase in the number of queries and complaints against ICOs.

In March 2019, the SC started collecting public feedback on the proposed framework for ICOs with the finalised guidelines expected to be published this year.

Although there are no known statistics on cryptocurrency fraud in Malaysia, Wong cited notable cases of fraud in the cryptocurrency world.

In 2017, a Vietnamese cryptocurrency company launched an ICO for its token and raised US$600mil (RM2.5bil) from about 32,000 people.

The company first launched the Pincoin ICO, promising constant returns to the investors, and then launched another token called iFan.

The investors in Pincoin did receive cash for their initial investments but the company later va­­nished with the investors’ funds.

“This ‘exit scam’ is one of the lar­gest ICO scams in Asia,” she said.

Cybersecurity expert Fong Choong Fook said investing in ICOs posed a risk as digital currency was not backed by any commodity.

He said the unregulated nature of ICOs made it easy for fraudsters and scammers to exploit investors for cash.

“ICOs provide a convenient way for any individual to raise funds on the Internet. The person can just claim he or she has a digital coin and that it carries a certain value.

“If a person believes it and banks in cash to buy that coin, the individual can raise funds without going through any legal filtering and supervision from a central bank authority.

“In order to raise funds from the public, regardless of which country you’re from, you should have a licence from the government,” he said.


Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 7
Cxense type: free
User access status: 3
   

Across The Star Online


Air Pollutant Index

Highest API Readings

    Select State and Location to view the latest API reading

    Source: Department of Environment, Malaysia