Do Your Due Diligence with Cryptocurrencies

What does it mean to do your due diligence with cryptocurrencies? It seems like every day a new crypto coin or crypto business opportunity pops up. And they run the gamut from legitimate, and extremely lucrative, investment opportunities to get-rich-quick and ponzi MLM models.  So how can investors sort out the good from the bad from the downright ugly? The secret lies in doing extensive due diligence and thoroughly understanding the opportunity in order to mitigate risk. Listen in as Clear Directory Founder Justin Recla sheds some light on the complex and fast-paced world of cryptocurrencies.

Welcome to the In the Clear podcast. My name is Justin Recla, and I’m your host. Today, we are going to be talking about a … Well, it’s a very hot topic right now, and it’s huge in the investment arenas, so if you’ve been following anything in the news, anything on social media, the concept of cryptocurrencies is hot right now. Today, we’re going to be talking about how to do your due diligence with cryptocurrencies. Folks, I’m letting you know right now that this area, Cryptocurrency, Bitcoin, Ethereum, Litecoin, whatever that you’re seeing out there, this entire industry right now is just wrought full of frauds and scams.

There’s a lot of great opportunities out there as well. There’s new business opportunities that are popping up on a regular basis that people are jumping on. The problem is that there’s also a lot of get-rich-quick schemes that are popping up and taking advantage of folks. First and foremost, make sure that the opportunity that you’re looking to get involved with, if you are considering playing with cryptocurrencies and Bitcoin, make sure that the opportunity is valid. Make sure it’s coming from a trusted, reliable source. That’s first and foremost.

Recognize too that there’s a lot of information out there on Bitcoin, because Bitcoin is fairly new … I mean, it’s been around for 15, 20 years, however long it’s been, but for the most part, it’s just now making headlines, and more and more people are getting attracted to it because of where it’s at in the price point and how much money people can make at it in that opportunity. Whenever there is opportunity to make decent amount of money, there’s always a decent amount of fraud and scam that goes along with it. So, first and foremost, make sure that the opportunity that you’re getting involved with is legitimate.

Second, recognize that just because you come up across an opportunity that may appear to be a fraud or scam on the surface doesn’t necessarily mean so, because recognize that there’s a lot of people that put opinions out there on what they think of cryptocurrencies or what they think about particular opportunities. Recognize that those are just opinions. Yes, those are great to take into consideration, but you have to do your own due diligence, you have to play within the scope of what’s comfortable for you. There’s a lot of opportunity out there that cost $50 to get involved with, and that’s not necessarily a huge amount of risk but you need to take into consideration everything else that goes involved with it because if it is something that you actually get involved with, that it turns out be a Ponzi scheme or a high-yield investment scam, then that could have repercussions as to who you’re sharing it with and how else you get involved, and so forth. It’s a lot of different things that go into, but just recognize that if you’re getting involved with an opportunity that just because you find some bad reviews on it or something that says it’s a scam, doesn’t necessarily mean that it is. At the same time, you always want to air on caution, especially when it comes to investing money.

We’ve seen it, folks, it’s the people that will hop on a high-yield opportunity is tremendous, and people will throw tends of thousands of dollars, they’ll throw their entire IRA into such an opportunity and, unfortunately, because they didn’t do their full due diligence … In particular, they don’t know they people that are behind the actual opportunity, they lose it all in the end.

Another thing that comes up is that in some of these opportunities you see a lot of great return, but the program doesn’t necessarily work like it was advertised, and so while you might get that great return, it actually takes longer than anticipated, and so the ROI is not necessarily the greatest.

There’s all sort of things that go into determining whether or not, what I call a crypto opportunity, is actually legitimate. Unfortunately, for a lot of folks that are out there looking into getting involved in cryptocurrency, there’s just co much information out there as to how do you make heads or tails of what legitimate and what’s not. Just know who you’re getting the information from, do the research, don’t just trust blindly, dive into it, find out who’s behind the opportunity, who’s created it. There’s not a lot of information out there on a business opportunity, on an investment opportunity, that may be a cautionary red flag for you. If you choose to get involved with it, then do such at a lower level. It’s not win or break the bank. Something that’s like a training wheel, is it allows you to test it out to determine whether or not this is actually a good fit and if it works for you or not.

That due diligence piece is really essential, especially in the heat of the cryptocurrency growth and boom that we’re seeing right now, and so that’s extremely important. If you’re paying attention to things like Facebook and Twitter, you’re probably seeing, I know I am, a lot of different opportunities from people that have some sort of insight on cryptocurrency, so unless it’s somebody that you know who’s done the work and dove into it is understanding the ins and outs of a program work. Be leery of just joining random groups because the information is typically … If it’s promoting a particular program, maybe … If you don’t know that person, if you don’t know the amount of due diligence that they’ve done, the information could be very skewed.

Even then, even if you joined in a group of somebody that you know, even then, still do your due diligence. It’s still on you at the end of day with your own investments, especially in the cryptoworld to make sure that it is a good fit, and maybe that you just put on some training wheels, your try it out at a lower-level, figure it out and see if it works. But if you have no experience with cryptocurrencies or Bitcoins, there’s a lot to learn before you even start investing in cryptocurrencies. You have to understand the concept of block chain, you to understand the concept of a wallet, you have to understand the concept of a hot wallet versus a hardware wallet, versus a off-line wallet. There’s all different things that you have to understand before you cam even start playing around with investing in the cryptocurrency world. There’s a lot of different areas of due diligence that you have to do on a crypto opportunity before you get involved. Just know that. Know that there’s a lot to go into it.

By all means, if you got money to burn, you just want to throw $10,000, $20,000 worth of something, by all means, that’s your prerogative, but I highly recommend that even then you still do your due diligence because, ultimately, at the end of the day, due diligence comes down to mitigating risk. If you’re comfortable with losing whatever amount of money that you may be putting into an opportunity, then by all means. That’s one method. But we always recommend doing some level of due diligence on any opportunity, even if it’s just ordinary stock option. If you’re look at investing in a company, the same rules apply when it comes to doing due diligence. The big thing is don’t make an assumption based off of information that you read, whether good, bad, or otherwise. Look into it for yourself. Figure out how it works. Figure out how that opportunity works. If the numbers don’t necessarily add up in your head and it doesn’t make sense, and it makes you feel uncomfortable, listen to that. Trust your intuition. Trust the piece that goes, “I’m not too sure that this is a good fit.”

Which brings me to my next point, a lot of these crypto opportunities that are showing up have some sort of multilevel marketing aspect to it, and a lot of times people say, “Well, it’s got multilevel marketing aspect, therefore it must be a Ponzi scheme.” And it’s not. It depends on the opportunity of course, but not all MLMs are Ponzi schemes. By all means, they’re pyramids, but so is a major corporation, it’s got a CEOs, it’s got officers, it’s got employees, a regular business is a pyramid as well.

Multilevel marketing is the same type of structure, but it uses the social aspect of it to market the business, so not all the villains are Ponzi’s, but typically, all Ponzis are MLMs. It’s just how it works. You got to be able to know how to identify what makes a legitimate MLM versus what makes a Ponzi scheme. Look at the numbers, and if the numbers don’t add up, then really take a hard consideration of, “Okay, how are they paying overrides in that MLM? If Bitcoin is the product that you’re selling, then how is the override of that getting paid if we bring somebody into the organization? How are those being paid in the system?” That’s just something to take a look at and take into consideration when looking at any opportunity that involves cryptocurrency, especially Bitcoin because it’s got such a high value rate right now, there’s a lot of people out there that will take advantage of people looking to get rich quick, so make sure you do your due diligence.

For us, it always comes back down to the people, that making sure you know who the people behind the company and the business are before you get involved, but that doesn’t mean that you can’t start looking things out and involving yourself in an opportunity to learn about Bitcoin, to figure out how it works so you can understand it before you get involved and get invested because if it does check out, then it may be an opportunity that’s a good fit for you regardless of where it’s coming from. Again, it all depends on your own level of risk. We’re talking about how you do your due diligence with cryptocurrencies and when get back after the break, we’re going to talk a little bit more about some of the things that are showing up on the internet, some of the opportunities that exist, and we’ll talk more on that right after this break.

Welcome back to In the Clear podcast. We are talking about how you do your due diligence with cryptocurrencies. Like we were talking about before the break, this is really, really a hot topic right now. In full transparency, folks, I’m looking into a couple of these opportunities myself because I know our clients are going to be coming to us, looking to whether or not these are actually legitimate opportunities. They’ve already started coming and asking for, what do you think of these things? We’re still fully vetting some of these opportunities out to determine what’s legitimate, what’s not, so we can properly educate those who ask us. But, ultimately, we can do that work, we can do that ground work, again, for us, it always comes back to the people that are involved. There are some opportunities out there where you can’t find a whole lot of information about the people involved, there’s others that you can find a lot about the people involved.

One of the things that we’ve noticed is that just because there’s not information out there doesn’t mean that the opportunity is not legit, at least from what we’re finding in the sense that because cryptocurrencies are so new, and the US government and IRS doesn’t know what they’re going to do with the money the people are making from this, because there’s really no way of taxing it because it’s all online, it’s digital currencies, it’s not a fiat currency where they can just make more of it and they can tax it all they want just because they can print as much as they want. Because they’re not too sure what to do with it, or how to regulate it, or how to tax it, ultimately, at the end of day, there are opportunities out there that are coming forefront that are just making it to where you can get involved but you just can’t do so from the United States. There’s all sorts of creative ways that people are finding to get involved in these opportunities to avoid the attention of the US government because of some of the rules and regulations that are coming down the chain, are being proposed right now, as to what the future of cryptocurrencies and being in the states means.

Then, there’s other companies out there, there are other opportunities out there that are trying to remain as compliant as possible, excuse me, either way, you have to know what your own level of risk aversion is, what are you comfortable with? If you get involved with something, does that mean just because you get excited, should you go share it with everybody? Maybe. But if you haven’t fully vetted it, be cautious of that because if it’s something that turns out to be bad, that really could damage your reputation. It’s something to take into consideration.

The two or three that we’re looking into, that I’m participating in, I’m not recommending to anybody just yet because I haven’t fully vetted them. I’m still figuring out how those things work to make a determination whether it’s legit or not. The big thing is really, again, coming back down to, what is your risk aversion level? It’s sitting with that. If you’ve got some play money that you can put into an opportunity to just see if it works, then by all means. If that’s comfortable for you, go for it.

Ultimately, at the end of day, here’s the one thing I know to be true, every opportunity that exists, whether it be a legitimate company, whether it be a Ponzi scheme, whatever it is, risk aversion level, you can make a really good determination on whether or not the opportunity is a good fit based on the business history, its success pattern and the people who organized it and started. If it’s this brand-new pop-up, it’s only been around for a year and the people behind it are brand-new, or the people behind it have a history of fraud and scam, that may be enough red flag for you not to get involved. If it’s a company that’s been around for 10, 12 years, and they’re just not venturing out into the cryptocurrency world with new opportunities that could be positive, but, again, it can also be negative. It depends on who’s behind it. If it’s the CEO of a company that’s been around for 15 years and has got a history of making some bad financial decisions, you may not want to get involved with that opportunity.

Ultimately, folks, at the end of the day, the amount of information that is out there on the internet right now is so vast that you can get lost in a world of positive reviews, negative reviews, you have people that’ll say cryptocurrencies are the wave of the future, you’ll have people that say cryptocurrencies are just a flash in the pan and aren’t going to be here, and everything in between. I’ve read information on the internet that says every single cryptocurrency is fraudulent to where it’s the thing that’s going to save the world. It really just depends on what you’re looking for, what kind of affirmations you’re looking for, and ultimately, at the end of the day, again, the risk aversion level, what you’re comfortable with, is what you have to pay attention to.

If you’re not 100% sure, I highly, highly recommend that you don’t share that opportunity with anybody until you get 100% sure on whether or not it’s legitimate or not. The only way you can do that is by doing your due diligence, diving in to figure out who the business is and making sure it’s within your comfort zone. If your do share it, then making sure you do the same thing, make sure you do your due diligence and say, “Hey, look, I’m involved in this opportunity. I’m comfortable with it, but you still need to do your own due diligence.” Put that back off on them, whoever you’re sharing it with, to give them peace of mind so they can say, “Hey, look, I’m recommending it, but you still need to do your own due diligence to make sure it’s a good fit.”

The one thing I recommend most is to just dive, dive in, dive in, dive in. Learn as much as you can about Bitcoin, learn as much as you can about Ethereum, Litecoin, all the major coins … There’s another point too, is that if it’s a new coin, if it’s something that’s trading for 10,000th of a penny right now but you can get 100,000 coins for free by just signing up for the wallet, you might want to take a look at that because there’s a lot of cryptocurrencies out there right now that are actual cryptocurrencies, but they’re more fiat coins than anything, because the people who are putting them out there are just producing them and just giving them away for free, hoping that at one point in time it will take on. Well, that’s not different than printing money. So understanding how blocking works … The fact that Bitcoin is only created through mining and not just passing out coins and stuff, there’s a lot of complexities that go into a valid cryptocurrency, understanding how it works, learning the language is essential, understanding the language of a cryptocurrency is huge. Starting there will really help open your eyes to everything that you need to look into from a due diligence perspective before you choose to get involved with an opportunity.

If you’re listening to this podcast, you made it to the end of this show. If you have a coin, if you have an opportunity that you want to vet, shoot us an email. Send us an email at, and we’ll start a conversation. I’m happy to walk you through the processes, what questions you’re asking. If we can vet the opportunity for you, we will. Let’s help keep you protected. I’m diving into this world full force, and I’ve got a lot of information to share with people, so if you have any questions on cryptocurrency, a crypto opportunity, reach out, send me an email, and we’re happy to have that conversation with you.

Again, thank you for listening to the show. We’ve been talk about how to do your due diligence for the cryptocurrencies. It’s a wild, wild West out there right now in the cryptocurrency world, make sure you’re protecting yourself by doing your due diligence before you get involved with any opportunity and make sure any business that you get involved with in the future is in the clear. Take care, folks. We’ll talk to you next time.


About the Author:

Justin Recla has over 13 years experience and advanced training with the US Army and federal government. He is a subject matter expert in tactical questioning, surveillance, counter espionage, threat and vulnerability assessments, and investigative techniques. He is an educator in concepts of effective communication and has taught hundreds of future federal agents how to conduct interviews and investigations. Justin brings his skills from the military sector and delivers them to the boardroom to help business owners protect their two most valuable assets: Time & Money.