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Fraudulent ICOs Are On The Rise. Here’s How To Spot (And Avoid) Them

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Initial coin offerings (ICOs) are all the rage these days as cryptocurrencies continue to attract enthusiasts and speculative investors, but for each credible ICO, there may be at least 10 shady ones. The Securities and Exchange Commission has shut down numerous fraudulent ICOs over the last couple of years.

Regulators have also been issuing guidance for investors who are captivated by cryptocurrencies and ICOs, but despite all the information that’s available now, many investors are still being tricked by fraudulent ICOs.

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So how can you tell if an ICO is a legitimate investment or a scam that just aims to steal your money? There are several things to look out for.

What is an ICO?

In order to recognize the danger signs associated with initial coin offerings, we first must establish exactly what they are.

Most investors who are thinking about diving into digital currencies have a vague sense of what ICOs are and that they have something to do with cryptocurrencies, but the details are generally sketchy for many investors.

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ICOs are essentially a form of crowdfunding that involves the use of cryptocurrencies. They’ve become a trendy way for startups to get capital from the general market rather than relying on venture capitalists or involving other intermediaries in the funding process.

Companies that are conducting ICOs sell tokens for cash or established cryptocurrencies, such as bitcoin. When the funding goal for the ICO is net, the project should launch, and then the tokens that were sold become a new cryptocurrency.

Regulators discuss cryptocurrency classification

Unfortunately, scammers have preyed upon uninformed investors who are crypto enthusiasts, and as a result, regulators have had to step in.

The SEC has also been working to classify cryptocurrency and its related products, including ICOs, and one of the debates has been whether or not they are considered securities, making them subject to federal securities laws.

William Hinman, who leads the Corporate Finance division at the SEC, weighed in on that very topic recently in a speech at the Yahoo All Markets Summit: Crypto.

Essentially, he said that what makes a cryptocurrency a security is actually how it is sold rather than what it is.

In other words, initial coin offerings are often considered to be securities because of the nature of the transactions, even though the cryptocurrency itself that comes out of the ICO isn’t necessarily a security—because the nature of the sale of it is different.

Thus, ICOs are generally subject to federal securities laws in the U.S. because investors buy into them and receive a financial interest in the project in return.

However, selling a token on the secondary market later as a one-off transaction without a financial interest in return does not constitute the sale of a security.

How the Howey test can help you spot fraudulent ICOs

The SEC has selected the case SEC v. Howey to use as precedent when it comes to determining whether a crypto product is subject to federal securities laws or not. The case can also help investors cut through all the marketing talk around an ICO as they try to figure if it’s a scam or not.

The Howey case revolved around a hotel owner that was selling interests in an orange grove and recording the transactions as sales of real estate rather than securities.

Most of those who bought interests in the grove had the hotel owner’s other company care for the trees, pick the oranges, and earn them a profit from their interest in the orange grove.

The Supreme Court ended up ruling that the transactions actually constituted sales of securities and not real estate, as two lower courts had ruled previously.

The result of the Howey case was that regulators now often use what’s called the “Howey test,” which is used to determine whether a transaction is a sale of securities or of something else.

An investment contract or security constitute an investment made in “a common enterprise with profits to come solely from the efforts of others.”

If that requirement is fulfilled, then it doesn’t matter whether the common enterprise is a speculative investment or whether a sale of some kind of property with intrinsic value (in the case of ICOs, tokens).

It’s important for ICO investors to understand the Howey test because it can help them determine if the ICO they’re considering is indeed a security.

That’s the first step to protecting yourself from fraudulent ICOs because securities laws should offer some protection, but there’s no better protection than education.

The best protection from fraudulent ICOs: education

The SEC has been working hard to educate investors about the dangers of ICOs and help them make informed decisions when it comes to investing in them.

It continues to be an uphill battle against the many scammers who find eager investors to be easy prey, but those who absolutely have their mind set on investing in initially coin offerings learn how to spot fraudulent ones.

It’s important to approach every ICO with the mindset that the vast majority are scams, and even those that aren’t present a risky investment.

In order to help consumers understand what fraudulent ICOs look like, the SEC launched its own fake ICO called HoweyCoins to demonstrate the red flags consumers should look out for.

Generally, fraudulent ICOs are easily recognizable by the claims that sound too good to be true and promises of “guaranteed returns.”

The reality is that no investment product can offer an investor guaranteed returns because they can’t know with certainty how well their product will go over.

Other key features of fraudulent ICOs include vague language or heavy use of jargon, so much that their website basically says nothing of importance.

Everything about the product remains unclear after you read the site. ICOs generally always include a white paper explaining the crypto network that they plan to build and its potential uses.

If you can’t understand what the tokens you’re investing in will be used for, it’s probably not a good investment.

Questions to weed out fraudulent ICOs

If you’re seriously considering a particular ICO right now, here are some questions you should be asking before handing over your cold, hard cash, based in part on some of the commentary by SEC Chairman Jay Clayton.

1. Who is behind the ICO? Typically, offerings include details on the team that’s building the crypto network.

In some cases, fraudulent ICOs have invented people with excellent qualifications, while in others, they claim qualified people are involved when they actually aren’t.

Even in the case of legitimate ICOs, it’s important for you to know who is selling the tokens so that you can judge their ability to build a successful crypto network.

2. What happens to your money when to buy in? What’s it going to be used for? Is it going to actually build the network, or will it be used to pay back others?

3. Has there been any documentation on what the team that’s running the ICO has done so far? If there isn’t, then their white paper should be perfect because they have no proof of concept yet.

4. What rights will you have when you buy into the ICO?

5. Are there audited financial statements available?

6. Can you sell tokens back to the company to get your money back? Or can you resell the token to someone else? What kinds of limitations are there on getting your money back out?

7. What will be the purpose of the blockchain that’s being created through funding from the ICO? Does it sound like a viable product? Has the blockchain code been released yet?

8. Does the ICO comply with all securities laws? What steps have they taken to ensure that they are complying with the law?

Perhaps the biggest reason so many scammers have been able to rake in millions of dollars via fraudulent ICOs is because cryptocurrency seems like some mysterious form of technology that enthusiasts are convinced will be the goldmine of the future.

It’s just generally not a good idea to invest in something that you don’t understand—unless you know someone who understands it very well and you trust their judgement on it.

Personal Finance

How You Can Do MORE With Your Money

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The more money you have, the more things you can do.

But what are you going to do with that extra money anyhow?

People tend to blow the money that they barely have. Sometimes they blow money before they even have it!

So, think about what you can do with your money, and think about what you are doing at the minute. Are you even covering the basics and making sure that you have a nice bit of savings behind you?

Most people aren’t. When thinking about what to do with money, people often jump to spending and thinking about the materialistic things that can be had in life.

But there really is more to life than that, and that’s what people forget about. Money can be used in such a way that it can go in your favor, rather than it feeling as though it’s just being thrown down the drain.

So, to stop you throwing it down the drain, we’ve come up with some great tips that should help you do more with your money. Have a read on, and see what you think.

Develop Your Home

Developing your home is sort of like a long-term investment option.

If for example you have a family home, it might have a few bedrooms, and perhaps more than one bathroom. This is great, and it probably gives you all of the space that you need to be able to function as a happy family.

However, your children hopefully aren’t going to live with your forever, and there comes a time where they’re going to have to move out.

When they do, you’re not going to want to live in some big house without any company apart from the two of you.

However, when you come to sell, you might not feel as though you’re getting a good enough price, even though the house might be spacious and in a good area. So, you need to think about what it might be lacking.

This is where your development head comes on, and you think of all of the things that you can do to increase the value of your home for a future sale.

Even though it might feel as though you’re wasting your money to begin with, it’s all about the money you’re going to make in the future.

The types of things that you want to be thinking about are extensions and renovations. You don’t necessarily need to extend to create another room, or another bathroom either.

Another simple option is to buy some smart home technology which might help improve the value of your home.

Could You Donate?

Doing more with your money doesn’t necessarily mean you’ve got to do more to benefit you. Sometimes, the selfless things we do in life will benefit us the most.

Plus, this one will definitely make you feel humbled and honored. So, when thinking about donating, the charity that you donate to is important.

You can either pick a charity that you feel you can relate to. Perhaps someone in your family has been affected, or is being affected by a certain disease or illness.

Or you could think about donating to human and wildlife aid organisations. The work that they’re doing around the world is revolutionizing some countries. Without it, some countries would struggle to get the majority of their population alive. But, it’s not just humans who desperately need your money.

Animals are crying out for help, especially those that are endangered at the moment. You don’t necessarily need to donate a fortune, literally every little does help when it comes to donating to charity.

You could even set up some form of fundraising day, and get your whole community involved. All you would need to do is pay to host and set up the event, and donate all of the proceedings to charity.

You might be able to make more this way, and you’re definitely going to raise some great awareness for whatever charity you’re trying to help. There’s also the option of going on pages such as gofundme, and figuring out which people need your help the most.

Some of looking for money to complete humanitarian aid missions, others are desperately seeking money for the medical treatment they need. Putting your money to a good cause like this is sometimes the best option, especially when you feel as though you have money to blow.

Investment Options

If you don’t want to give away your money, and your main aim is to make it, then you’re going to have to think about investment options. First of all, you need to know that investment is risky. You’re not necessarily going to make back your money every time.

But, it’s a game that’s worth playing. Play it right, and you will always be building on your fortune. So, the first investment option that we want to talk about is the property one.

We’re talking about it first because it’s probably the most easiest to get into. First of all, you can go into properties abroad, which a lot of people are now choosing to do.

Once you’ve purchased an investment property, it’s all about making sure it’s perfect to rent out, and then getting the whole process of being able to rent it out started.

You should always make sure that you’re following the rules of the country that you would like to rent from.

There are certain laws you’re going to need to follow, and you can get into a lot of trouble if you try and avoid them! To make sure you’re getting enough custom, you need to make sure you’re showing your apartment as listed on multiple different websites.

You’ll most likely have to pay a fee for this, but at least it’s going to bring you in some custom.

The second investment option we have to talk about is something you can do from the comfort of your own home, and you don’t need such a big lump sum of money to start the investment. We’re talking about bitcoin, and there’s many reasons why you should consider investing in this area.

Despite what people might think, there is a way of making money through it. All you need to do is learn how to trade, and do your thing!

There are plenty of online tutorials that will walk you through the whole process. But essentially, it’s all about making sure that you’re buying and selling at the right time.

Enjoying Yourself

Sometimes, if you focus on what you’re spending your money on so much, and where it’s going at the end of every month, then you’re never going to be able to enjoy yourself.

Sometimes, if you have the money to do so, you’re best off just enjoying yourself. As they say, you’re only young once, and life is meant for living.

Take some time to go and see the world, or buy that car you’ve always wanted to buy, or take yourself on the shopping trip that you have badly needed for so long.

The more you treat yourself, the happier you’re going to feel. But the thing you need to make sure of is that you’re not getting carried away. I

t’s so easy to overspend, and it’s what most people tend to do when they have a lot of money in their bank. The last thing you would want is to go from riches to rags, so always watch your money.

Mini Business

This is just a final option that you could think of. A little side business on top of what you already do could help your finances just grow and grow. It doesn’t have to be anything that takes too much of your time, perhaps something so simple as a home business in arts and crafts.

As long as it’s something that you can grow, it’ll be something that you’ll enjoy. Plus, if things get a little too hectic and you find you can’t manage, you can always give up!

Be sensible, and do more with the money you’ve got, While you can!

This article originally appeared on IdealREI.  Follow them on FacebookInstagram and Twitter.

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Personal Finance

Renting A House? Here Are 7 Things You Should Consider

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Most millennials want to have their apartments, either to be independent, live close to places of work or discover themselves (goals and capabilities) outside the influence of their families.

Before you decide to rent or move into an apartment, be ready to do the work. Do not be desperate. There are a lot of background checks to avoid financial or non-financial issues in the future – and you need to go through that process very carefully.

Do not leave the things that matter to you in the hands of your agent.

Here are some points to consider when trying to rent a house:

Research the Area

You have to explore the area before you move in.

Is it near the market? Is it near the hospital? Can you easily access the bus stop? Does it get flooded during the raining season? Is it safe? Is close enough to work? Is the environment conducive? Is dirt dumped close to the building? etc.

As I said earlier, it is up to you to do all the research you can before signing or making payments. You can speak to few individuals in the neighborhood to get more information on what you need.

You should start your apartment search way early to avoid making decisions in a haste.

It costs more than you think: Understand the Contract

Before accepting to pay any rental fee. You need to go through the contract to understand the exact amount you would pay in your first year of moving in and in subsequent years.

An agent might tell you a rent fee is $10,000 per annum, but then, you find yourself paying more than that in the first year. This might leave you financially down because it wasn’t planned for. Fees might include:

  • House Rent
  • Agency Fee
  • ”Omo onile” fee
  • Security fee
  • Waste fee
  • Legal fee
  • Administration fees etc.

Another thing you have to sort is the rent increase issue. Will there be subsequent increase in the rent? You have to get clarity on this from the agent or landlord.

In the event of justifiable rent increase, you have the right to know early enough to prepare for it.

Check the Price Guide for your Area

This is really important, to avoid being cheated on. Houses in specific areas have similar costs of rent, provided they are offering you the same services.

Beware of Hidden Cost

There may turn out to be some extra hidden costs that the landlords and letting agents will not inform you about. These costs are then passed onto you.

This happens a lot and it is very rampant when renting houses in Lagos. You find yourself having to pay accumulated electricity, water or waste fees that you knew nothing about.

Bills, Bills, Bills 

Renting a house or home comes with a lot of responsibilities. So it is not just about renting the house, but you have to understand how you can sustain yourself through out the rent period. Renting houses comes with a lot of monthly or quarterly bills you have to pay. You have to plan yourself financially to deal with bills events. You might be faced with:

  • Gas bills,
  • Electricity bills,
  • Water bills,
  • Fuel Bills e.g generator
  • Waste bills,
  • Security bills,
  • Miscellaneous bills e.g house repairs, electronics repairs etc.

Shared Apartment: Know your Room/House mates

If you decide to rent an apartment with someone else to save cost, that is absolutely fine. But it could either be a really wonderful experience or a total disaster. Knowing your roommates also entails talking to them before both of you decide to share costs. You must:

  • Talk about how to split the bills
  • Respect each others differences
  • Condone each others bad habits etc.

This article originally appeared on Piggybank.ng. Follow them on Facebook , Twitter , and Instagram

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Personal Finance

7 Money Facts Every Millennial Should Know

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I didn’t know much about money when I was in my 20’s.

I knew how to work, I knew how to buy stuff, and I was smart enough not to run up my credit cards.

Other than that, I didn’t really know much. The fact is money and finance is a subject which you either love or you hate.

Most of us try to avoid the subject of finance because most of our parents avoided the subject.

However, I believe now that it’s something every parent should teach their children and it’s a subject every adult should be interested in.

If I could go back in time and teach myself a few things when I turned 20, here’s what it would be.

Time Value of Money

The time value of money is a concept which states money in your pocket today is worth more than that same money in the future. Another way of looking at it is that if you have $10 in your pocket today, tomorrow it will be worth less than it was today.

That’s because money can be invested and multiplied. So, $10 today could be $11 next year if you invested it. So, getting $10 next is worth less than getting $10 today because of your ability to invest.

This applies to all of your money, including debts. So, paying off a debt today is worth more than paying it off next year.

If I understood how much my student loans would accumulate (because I deferred them) over my years of college, I would have worked harder to pay them down before leaving college. Or, at the minimum, I would have paid the interest every year.

Inflation

Inflation is closely related to the time value of money. It is another reason that every day your money is worth less.

50 years ago, $10 was worth a lot, however, these days it can barely buy you anything at all. Inflation is an important thing to consider because you will need to think about your future.

If you are saving a retirement fund for yourself, you may need to save a lot more due to the increasing costs of goods as time goes on.

So, not only is investing early important to make your money worth more, you need to pay attention to inflation so it isn’t worth less!

Sunk Costs

I did learn about this in college, so I can’t say that I’d have taught myself something I actually was taught. But, it was so important that I want to reiterate it.

A sunk cost is any money you’ve spent that you can’t get back. The idea is that sunk costs should not influence future behavior.

The classic example is if you spend $20 to get into a movie, sit there for 30 minutes, and realize it is an absolutely horrible movie. But, there is 2 hours left.

Do you sit and finish it since you already paid?

The answer is no. You can use those 2 hours to do something more fun. There is no reason to suffer through the rest because those sunk costs should not influence your behavior.

Asset allocation

Asset allocation simply means how you allocate your investments. Traditionally, it is suggested to spread your investments out across different investments. The idea is to lower your risk of losing the money you put into it.

But on the flip size, the more diverse you are, the lower your potential returns. That’s because the more investments you have, the more likely one of them will be a failure.

Think about it this way, if you invest in one thing, it could be a crazy success or a total failure. If it’s a huge success you make a ton of money.

But, if you got it wrong, you could lose your investment.

Diversifying makes it so you’ll probably get one or two awesome investments but you’ll also get one or two failures. So, you’re potential returns go down, but your potential losses decrease as well.

Net worth

Net worth is something I only started tracking in the last couple years.

Your net worth is the total value of your assets minus all of your obligations.

Net worth is important because it represents how well you are financially. If your net worth goes down, you are making some bad decisions while if it continually goes up, you are making good decisions.

It’s important to track this, even at a young age. Every month look to see if you go up or down in value and make adjustments accordingly.

Cash Flow

The only thing more important than your net worth is your cash flow.

Every investment you make should create some sort of cash flow (unless you earn so much that your income just doesn’t matter anymore).

In theory, it doesn’t matter what the investment is worth, as long as it provides the cash flow you need to support yourself.

So, if all of my properties lost half of their value, as long as the cash flow is the same then I’m happy.

Here are a bunch of ways to create $10,000 per month in cash flow.

Five C’s of credit

When a lender evaluates you for a loan they will look at several different factors: character, capacity, collateral, capital, and conditions. All of these are the parameters which you will be measured against for a loan.

You can also think about your credit rating and whether you are deemed financially stable enough to take on a large sum of money and pay it back on time.

Bad credit can be very smashing to your future and you can change it by using a bad credit loan to prove you are trustworthy enough to take on a new loan.

This article originally appeared on IdealREI.  Follow them on FacebookInstagram and Twitter.

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