There Are Crypto ‘Experts’ Everywhere. Before you pay one, you should be sceptical
Earlier this year in California, a self-described “cryptocurrency expert” was imprisoned for embezzling millions of dollars from clients in a cryptocurrency scam.
The scheme, in which the consultant admitted to embezzling clients’ cash worth more than $20 million today, demonstrates how bad actors can exploit novices in a developing and confusing business.
Where should newcomers go for help in an industry where there are no standards for delivering advise or instruction to investors? Private cryptocurrency advisors needed to have any traditional credentials, such as a licenced financial planner (CFP). With personal finance specialists and even government authorities constantly warning about the security dangers and possibilities for fraud associated with bitcoin, traditional financial counsel provides a solid backstop.
Daniel Johnson, a CFP with ReFocus Financial Planning, states, “I have never advocated or counselled someone to seek out an independent bitcoin consultant.”
“It appears like this is a calamity waiting to happen.”
Before you pick where to place your money, educate yourself as much as possible. And keep in mind that you are your own best financial advisor.
“No one will ever care as much about your money as you do,” says Jeremy Schneider, founder of Personal Finance Club. “Some self-education is always a terrific initial step that will serve you well for the rest of your life.”
If you want professional guidance, you should definitely go with a traditional financial counsellor who is conversant with cryptocurrency. When looking for a financial counsellor, look for one that is qualified in financial planning (CFP).
According to Theresa Morrison, a CFP with the Beckett Collective, CFPs must act as fiduciaries with integrity and competence. “In English, this translates to operating in the best interests of the customer, with honesty and candour, as well as subject-matter knowledge and the ability to use that information,” Morrison explains.
According to Morrison, any CFP who can provide advice on digital assets “must have significant understanding and ability” on the topic because of this fiduciary responsibility. “A consultant is not obligated to follow any of this,” Morrison argues. “They could be experts or not.” They may or may not be trustworthy.”
One of the most important advantages of consulting a CFP is that they can assess your overall financial situation and advise you accordingly. “Right now, all advisors must assess if investing in crypto is in the client’s best interest,” says Elemental Wealth Advisors’ Dan Herron, a CFP. “You’ll see a lot of tiny allocations if we find that it is.”
“When the scenario requires more skill or a different experience than I have,” Morrison admits, it makes sense to seek out professionals. The majority of these examples were much above what the average investor would need to know.
Morrison would look for someone “who has a solid reputation within the specific competence in traditional markets and has converted that expertise to digital assets” if she needed to locate one.
But, as Morrison points out, for most clients interested in dabbling with crypto, it’s “much more about education,” which CFPs like her suited to deliver.
The Risks of Cryptocurrency Investing
Private bitcoin consultants can range from someone with a rudimentary understanding of cryptocurrency to a seasoned pro with years of experience in blockchain and digital assets.
Hiring someone who isn’t a CFP to deliver reliable, professional advise is a risk because there is no regulation or standardisation on who may call oneself a cryptocurrency consultant, advisor, or expert. If you’re looking for crypto advice that goes beyond what a CFP can offer or what your own investigation has shown, a thorough background check is a fantastic place to start.
The potential of hacking and fraud is one of the most serious concerns among crypto investors, and with good reason. According to data from the Federal Trade Commission, cryptocurrency crimes have been on the rise, with a median loss of $1,900 per report between October 2020 and March 2021.
Nicole DeCicco, the owner and founder of CryptoConsultz in Portland, Oregon, knows firsthand about the dangers after losing Ethereum in a 2016 breach – she was an Ethereum miner at the time. Her early experience with cryptocurrency and knowledge of the technology prompted her to create her own company. “I had a lot of friends begging for aid when I was mining, and I gladly offered it,” DeCicco says.
How to Detect (and Avoid) Crypto Scammers
The clearly bad actors out there attempting to take advantage of a burgeoning crypto industry and the investors who lured to it. DeCicco says she gets clients who burned in the past “all the time.” DeCicco said, “I hear about all kinds of scams.” “Money they put into educational programmes or investment advice, and they duped out of it.”
DeCicco claims she’s seen frauds on social media in which people or businesses seek wire or crypto payments to unknown wallets and claim huge profits.
“There’s plenty of risk in the business. And we’ll continue to face bad actors taking advantage of the potential through unscrupulous activities. Just like any other emerging market,” DeCicco says.
There are a few things to keep an eye out for:
Crypto professionals that don’t want their real names associated with their company
Someone with no documented blockchain or crypto experience
Someone who wants to be paid by wire transfer, gift card, or cryptocurrency
People who promise to make you money.
Assume something is too wonderful to be true if it seems too nice to be true. If you’re unsure, see a professional financial planner. When it comes to cryptocurrency transactions, scammers aren’t always the only thing to be concerned about.
Other Ways to Prevent Crypto Fraud
The following are some tips from the Federal Trade Commission on how to prevent being conned:
Never use a wire transfer, gift card, or cryptocurrency to make a payment. There’s a slim chance you’ll be able to get your money back.
Some con artists begin by making unsolicited offers from so-called “investment managers.”
These con artists claim that if you give them the bitcoin you purchased.They can help you grow your money.
However, if you log in to the “investment account” they set up for you. You’ll discover that you can only withdraw your money if you pay fees.
Unsolicited job offers to assist recruit cryptocurrency investors, sell cryptocurrency, mine cryptocurrency. Or convert cash to bitcoin sent by some scammers.
Scammers promise that you will profit. It’s a con if they guarantee you’ll make money. Even if a celebrity endorses it or there are testimonies. (Those are easy to forge.)
Scammers promise large sums of money with a high probability of success. Nobody can promise a specific return, such as doubling your money. Much less in such a short period of time.
Scammers claim to be able to provide you free money. They’ll say it’ll be in cash or cryptocurrencies, but promises of free money are always lies.
Scammers make bold statements with no supporting evidence or justifications. Smart businesspeople want to know how their money is being invested and where it is going. And smart investment counsellors are eager to share their knowledge.
Check it out before you invest. Look for the company’s name and the cryptocurrency’s name. As well as words like “review,” “scam,” or “complaint” on the internet. Take a look at what others are saying. Also, learn about other frequent investment swindles.
Before paying anyone for money advice. Make sure you thoroughly verify them, schedule an exploratory appointment, and conduct your own independent research. If you believe professional guidance appropriate for you, a CFP will be your best bet. It’s more of a case of buyer beware when it comes to more informal consultants. Whether it’s with crypto or anything else.
“Be cautious,” Morrison warns, “since the right response to the wrong question will lead you down the wrong path.”