The Central Bank of Russia registered a steady growth of financial pyramids based on alleged cryptocurrency investments in the first half of 2018, according to local outlet Kommersant that quoted Valery Lyakh, Head of the Bank of Russia’s Department for Countering Malpractice.
The regulator has identified dozens of such cases, despite that entry price for crypto schemes is 2-3 times higher than for traditional pyramids. Fraudsters hunt for victims mostly online and allegedly target citizens living in the central regions and large cities of Russia, where the average income is higher. This is a distinguishing feature of crypto pyramids, Lyakh said.
The average “investment” in the classic Ponzi scheme varies from 30,000 RUB to 50,000 RUB ($500-$800), while those pretending to be crypto projects demand an entry investment ranging between 80,000 RUB and 100,000 RUB ($1,300-$1,600).
However, potential investors have become more prudent and responsible when choosing their investment targets and tend to do their due diligence and care.
Ilya Maximenko, the founder of PlasmaPay payment system, recommends starting the pre-investment due diligence process with detailed research on the project team.
“Celebrities among the experts do not automatically confirm the quality of the project. Developers are the key people. Just look at their share in the team,” expert says.
“If an ICO team have one developer per nine marketing managers, then it is clear that they want to sell it in the first place,” Maximenko said.
Meanwhile, lots of projects launch ICOs with the aim to raise additional financing and improve the functionality of the existing products and attract new users. It means that the newbies can start with relatively safe projects that already have a working product and avoid risks associated with startups.
According to a separate research, conducted by the Wall Street Journal, nearly 20% of ICOs are outright scam.