How to Navigate the Crypto Wild West

Floyd Mayweather is considered by many to be the best boxer on the planet. But he doesn't know squat about the cryptocurrency world.

Let me explain. The New York Attorney General's office arrested two founders of Centra for defrauding investors out of $32 million with an Initial Coin Offering (ICO).

Earlier this month, federal authorities accused Sam Sharma and Robert Farkas of misleading investors. The Miami-based pair promised that their new digital currency would be tied to a debit card that operated on the Visa and Mastercard networks.

However, the SEC claims that Centra "sold investors on the promise of new digital technologies by using a sophisticated marketing campaign to spin a web of lies about their supposed partnerships with legitimate businesses."

As the complaint alleges, these and other claims were simply false. Moreover, Centra has no business relationship with Visa or Mastercard. Worse, several of the Centra executives listed on its website were completely fictitious people!

What's This Got to Do With Floyd Mayweather?

Mayweather is a highly decorated athlete whose fights have attracted plenty of deep-pocketed sponsors over the years. Recently, he became a celebrity endorser for Centra — and his endorsement probably went a long way toward helping Centra pull in unsuspecting investors.

The arrests came just in time. Farkas had a reservation to leave the country, but was arrested before he could board the plane. Investors, however, will be lucky to get back any of their money.

The price of Centra's crypto-coin, by the way, has crashed.

How You Can Make Sense
Of This Crypto Wild West

An ICO sounds like an IPO. But it offers nowhere near the security of a government-reviewed and approved Initial Public Offering.

Floyd Mayweather

ICOs are typically issued by risky start-up companies who want to raise money without going the traditional method of getting their shares listed on an exchange like the NYSE or Nasdaq.

Many of these ICOs have been wildly popular with investors, too. Investors have poured $6 billion into the fledgling, high-risk tokens.

The problem for investors is that ICOs are largely unregulated and susceptible to fraud. In fact, I think the majority are nothing more than crypto-sounding scams ... and something you should steer very clear of.

According to the Satis Group, a cryptocurrency advisory, a whopping 81% of ICOs have been found to be scams. With those kinds of odds, you'd be a fool to throw any of your hard-earned money into an ICO.

No wonder the SEC has issued dozens of subpoenas and halted orders for soon-to-be-released ICOs.

Unfortunately, this won't be the last time we hear a story like Centra's. There are thousands of companies vying for a piece of the $270 billion-and-growing crypto market pie.

However, it would be a mistake to lump all the speculative ICOs in with traditional, established cryptocurrencies like Bitcoin and Ethereum. Cryptocurrencies are risky, volatile investments, but they carry a fraction of the risk that ICOs do.

So, if you want to invest in digital coins, my best advice is twofold:

1) Stay away from ICOs, and

2) Take a look at the Weiss Cryptocurrency Ratings before investing a penny of your money.

Have you heard about our new crypto grades? You know that Weiss Ratings is the nation’s leading independent ratings agency of financial institutions. And our research team believes there is real value to be found in a small number of cryptocurrencies. That's why we recently became the first to release letter grades on cryptos.

These ratings are based on a groundbreaking model that analyzes thousands of data points on each coin's technology, usage and trading patterns. And even before Centra's founders became the first people arrested in conjunction with a coin offering, our research told us to stay far away from this ICO.

We publish our ratings of established and up-and-coming coins every Thursday afternoon. You can get them delivered straight to your inbox when you click this link here.

One more thing you can do to keep your capital safe — don't get your investment advice from celebrity endorsers. Floyd Mayweather is a heck of a fighter, but he doesn't know squat about cryptocurrencies.

Best wishes,
Tony Sagami

About the Technology Analyst

Even in the worst years for stocks, Tony was twice named “Portfolio Manager of the Year” by Thomson Financial. He was one of the first to introduce computer software for trading stocks. And in the early 2000s, he wrote “The Supernet,” providing a vision of the future internet that was far ahead of its time.

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