Virtual currency holders around the globe were stunned when Tokyo-based exchange Mt. Gox said it had lost an estimated 850,000 of bitcoin, a virtual currency that is gaining popularity worldwide. With little answers coming from Mt. Gox itself, angry bitcoin holders flocked to internet message boards to declare fraud against the company. Mt. Gox claims the missing bitcoins are a result of hackers and theft, while critics say it is all just an elaborate ruse to cover up massive fraud. Time will tell the true story, but in the meantime there are some important lessons that everyone can glean from this incident whether they use virtual currency or not.

Vet all financial institutions.

A company is not necessarily a reputable bank just because it says so on its website. Check to be sure that any institutions courting your money, real or virtual, are backed by regulatory agencies like the FDIC. If you are dealing with an institution outside of the U.S., consider hiring a private investigator to do some financial research for you. An investigator can visit supposed physical addresses and ensure that the institution really exists. When you are dealing with online-only entities, you will want to be especially sure that you are aware of what they are all about before sending any money or personal account information.

Don’t jump on the bandwagon.

Just because it seems that everyone else is investing money in a certain place, or placing trust in a certain company, does not mean that everyone else is inherently correct. A survey found that 59 percent of consumers make purchasing decisions based on what their friends say and do. While this is a smart way to find recommendations for everything from grocery stores to stock market investments, friends can fall victim to fraud too. Fraudsters are very good at convincing people en masse that what they are offering is legit. Of course you trust your friends, family and co-workers but they could unknowingly be leading you astray because they have been duped by a scammer. Think rationally about all financial decisions. Get your information from people who can do the research to give you a proper answer.

Read the fine print.

Philippines private investigators know very well about the risk for fraud and scams.  In the Philippines, fraud it at every corner, and doing business here without a background check or due diligence is a dangerous game to play.  Philippines investigators say always be completely aware of what you are signing, financially or otherwise, before you put the pen to the paper. If you are investing money, find out the exact terms of that agreement before you hand over the cash. In the case of Mt. Gox, people who lost bitcoin will likely never see repayment for it. The company has filed for bankruptcy protection and since the currency is virtual, it is not backed by any reserves or insurance. Know the risks of what you are agreeing to before it turns out that you are too late to retrieve lost funds.

Beware of “can’t miss” deals.

Nothing lasting is ever earned without the proper channels and work. If you see a chance for fast cash, take a step back and analyze what you could be getting yourself into. People fall for things like Nigerian letters scams or online investing fraud all the time because they are blinded by the promise of quick money for very little work. In general, when an investment opportunity has a very small window of time to be realized, red flags should go up in your mind. Do not rush into financial decisions based on the promise of a quick buck. Protect yourself from becoming a victim by making rational, calculated financial decisions and do not be swayed by your emotions.

If you plan on doing business abroad, be smart and speak to an investigator about international due diligence.  This service can minimize your risk, verify the offer and potential business partner, and identify risk factors and provide evidence that you would have never known.

Remember to always think logically when it comes to your money, and to rely on professional investigators to guide you in the right direction when you are unsure about a deal.

C. Wright
© 2014 Philippine PI

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