ICO exit scam losses top $100 million

The CC Forums

Admin
Staff member
According to CCN today, which references this original article from Diar, straight up ICO scams cost investors $100 million in lost funds so far. The referenced article goes on to point out that these losses don’t take into consideration those projects that raised funds via ICO and are currently burning through them quietly and under the radar without any hopes of producing a functioning system.

Excerpt:

What’s much harder to recognize are projects that are slowly burning through the raised capital with no product to show for it. Less than a handful of projects have gone live and the ones that have gone live have seen very limited use. In the grand scheme of things, blatant exit scams are only a small percentage of the total amount raised through the ICOs. Most invested capital is tied in the largest projects. Diar crunched the numbers for top 10 ICOs whose tokens have been trading for at least 6 months and found that their price fell by 93% on average from their all time highs erasing $22.3bn from the market cap.

The lack of accountability in crypto will directly lead to regulations. Crypto has failed to police itself, leading several countries to propose legislation restricting ICO’s or placing them into categories that come under current regulatory systems.

Many long time crypto enthusiasts decry legislation and prefer self-policing systems, but the current environment falls well short of that ideal.

We at TCF continue to believe that scams and ICO’s have contributed heavily to 2018’s bear markets. Until investors approach crypto with deep analysis, skepticism and become much more selective with their money, prices will remain suppressed.

Remember, all the lost money could have been injected into the few legitimate projects, supporting both development and market prices. These searches for get rich quick schemes need to stop for crypto to mature.

It’s your hard-earned money. Stop sending it to non-existent projects in the hopes of a quick profit. Do your research. Be critical. Be thorough. Be careful.

Also posted in our Scams section with the original reported list of biggest ICO exit scams
ICOs probably biggest crypto scam

The CCN article follows:

https://www.ccn.com/ico-exit-scams-have-stolen-nearly-100-million-research/

Excerpt:

The cryptocurrency industry may be maturing, but that doesn’t mean it’s likely to shed its reputation as a playground for scam artists anytime soon.

That’s according to a report from Diar, which found that ICO exit scams have now cost investors nearly $100 million.

The majority of these stolen funds, an estimated $68 million, has been raked in by exit scamsthat have occurred during the first two weeks of August. The largest, allegedly pulled by the China-based Shenzhen Puyin Blockchain Group, raised $60 million from three separate ICOs before attracting the attention of the State Market Regulatory Administration (SMRA)
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UrbaneUKG

Moderator
I think there were too many ICO's for projects that are hard to say "no" to like projects that created their own blockchain that are mineable. Many people wanted to get in on the next Bitcoin or ETH which has led to a huge and unstable investment groups and trends that lead to disasters like Verge or Skycoin and now with controversies with EOS. Their coin buyers have no interest in building or creating these blockchain, so it's not surprising that these big over pumped coins end up collapsing our market when people sell quickly once they believe the token is "done". Everyone always goes back to Bitcoin in the end.
 

CryptoTC

Crypto Fat Cat
Staff member
I think a lot of people really wanted to believe they were investing in potentially huge projects that could disrupt whole industries while making themselves rich. I heard so many pitches that outlined a market segment, reported on total economic impacts of that segment and then closed with “if token X can capture even just 1-2% of this, it will grow in market cap to 10x, 20x or 50x ICO price!” Problem is most won’t capture any of the targeted market. Most won’t even finish development.

Others jumped in hoping to flip tokens as soon as they hit exchanges.

Questions to ask before you send money:

1. Does this solve an actual problem?
2. Does this create a service that isn’t available?
3. Is there an actual market for the product or service?
4. Who are the competitors?

If the answers to those aren’t easy to determine, walk away. If the answers are negative, walk away. If you aren’t willing to go very deep in your research, walk away.

Then and only then can you move on to team, experience, how raised funds will be used, where company is incorporated and what public documents can be found to confirm the legitimacy.

Years ago, most investors stayed away from stock IPOs because of the risks. Venture capital knows that even the experts only hit investment winners 5-10% of the time. And they do deep research. The average retail investor cannot duplicate even that low success rate.
 
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CryptoTC

Crypto Fat Cat
Staff member
On the heels of the OP report, news out of the EU on moves towards regulating ICO’s.

The legislation is pretty limited though, applying only to fund raising less than 8 mill euros.

This Regulation gives the opportunity to ICOs that want to prove their legitimacy to comply with the requirements of this regulation. Whilst this regulation may not provide the solution for regulating the ICO market, it takes a much-needed step towards imposing standards and protections in place for what is an excellent funding stream for tech start-ups," he wrote.”

EU Lawmaker Wants to Include ICOs in New Crowdfunding Rules - CoinDesk

The report states that crowdfunding service providers "should be permitted to raise capital through their platforms using certain cryptocurrencies." However, while ICOs "offer new and innovative ways of funding," they can also be used to "generate substantial market, fraud and cybersecurity risks to investors."
 

The CC Forums

Admin
Staff member
On the heels of the OP report, news out of the EU on moves towards regulating ICO’s.

The legislation is pretty limited though, applying only to fund raising less than 8 mill euros.

This Regulation gives the opportunity to ICOs that want to prove their legitimacy to comply with the requirements of this regulation. Whilst this regulation may not provide the solution for regulating the ICO market, it takes a much-needed step towards imposing standards and protections in place for what is an excellent funding stream for tech start-ups," he wrote.”

EU Lawmaker Wants to Include ICOs in New Crowdfunding Rules - CoinDesk

The report states that crowdfunding service providers "should be permitted to raise capital through their platforms using certain cryptocurrencies." However, while ICOs "offer new and innovative ways of funding," they can also be used to "generate substantial market, fraud and cybersecurity risks to investors."
You’re like a dog with a bone on this one. :D
 

CryptoTC

Crypto Fat Cat
Staff member
You’re like a dog with a bone on this one. :D
ICO’s dumping ETH while also short selling to hedge their own moves and increase returns?

https://www.ccn.com/did-icos-cause-ethereum-to-drop-by-44-in-2-weeks-by-dumping-on-the-market/

According to CCN report that may be happening. Legitimate ICO’s shouldn’t be trading, just selling as needed to fund their development. Legit projects probably do need to hedge their underlying value a little bit though, but they could have done that up front by converting into fiat with an eye towards building a stable capital reserve.

Crypto world is crazy. ICO’s got by with so much BS it’s hard to believe people still send money to any at all.
 

Old Man Crypto

Expert chainblocker
This is a good thread. Reddit posts all over the place today about altcoins dying a quick death. Major outlets on it, crypto figure heads spouting off about it.

Probably means a good time to buy honestly. At least those few real coins with use and support.

Now which ones are those again? :confused:
 

BitFit

Contributor
This thread makes me want to dump all alts.

No transparency. No rules. No chance individual investors can ever do research and be confident they have an accurate picture of what’s going on. Crypto companies can say and do anything apparently.

2017 bull market is officially over and never to return for most of this stuff. ICO’s? We want to create a network of video content creators rewarded with our tokens for publishing good content on the platform.

Yes, it’s called YouTube, and you aren’t replacing it. Same with every other damn project designed to replace the regular world with a utopian blockchain solution. Unneeded and unwanted, but plenty of money got sent anyway.

The whole process stinks and led to this market drop like you’ve said. Can’t go away fast enough.
 

CryptoTC

Crypto Fat Cat
Staff member
Cross posted from this thread Scams dominated ICO’s 2017

I remain on my anti-ICO crusade.

https://www.ccn.com/icos-an-unsustainable-financial-bubble-jihan-wu/

Wu isn’t the most popular figure in crypto, but he is spot on with this opinion. Calling ICO’s a “fad,” he predicts the fund-raising model isn’t sustainable. I completely agree with him.

It still boggles my mind how many people threw away hundreds of millions of dollars into vapor. ICO’s forever stained crypto and Ethereum.

They don’t work people. Avoid them. Almost none of them have products. Wait 6 months or longer after an ICO, then buy a token you’re interested in IF it still exists and trades. Most won’t thus saving you money.

Excerpt:

I believe ICOs are kind of an unsustainable financial bubble. It will burst eventually,” he said. “It’s just a matter of time. I believe it’s just one year or two. Either way, it will just disappear.”

While Wu expects traditional equities — stocks, bonds, etc. — to eventually migrate to a tokenized platform, he said that the current ICO model, through which investors purchase tokens that may be regulated as securities but generally do not entitle purchasers to dividends or voting rights, will eventually collapse since investors contribute to the crowdsales purely on speculation that they can sell the tokens later at a profit.

Wu is not alone on this bearish outlook toward ICOs. Binance, the world’s largest cryptocurrency exchange, was bootstrapped through an ICO, yet the head of its recently-launched venture arm has said that the firm believes the industry is in a bubble that will eventually pop.

He spoke to CoinGeek on this topic. While he specifically goes out of his way to mention BCH, I’m more calling attention to his comments on ICO’s and how traditional investment vehicles will survive along with just a few cryptos.

Jihan Wu: ICOs are ‘unsustainable financial bubble’ - CoinGeek
 

CryptoTC

Crypto Fat Cat
Staff member
Finally some good news about ICOs. Half of them didn’t raise ANY money at all.

Maybe more will be discouraged from pursuing garbage fundraising attempts.

Report: Nearly Half of ICOs Failed to Raise Funds Since Start of 2017 - CoinDesk

Nearly half of all initial coin offerings (ICOs) in 2017 and 2018 failed to raise any funds, while another 40 percent raised more than $1 million each, a new research report claims.

Research and consulting firm GreySpark Partners studied the ICO market across the past several years, finding that as many as 890 token sales did not raise any funds at all. By contrast, according to the report (embedded below), 743 token sales were able to reach the $1 million mark.

GreySpark also noted that many token projects fail to provide a positive return-on-investment, particularly as time passes.
 

Old Man Crypto

Expert chainblocker
Finally some good news about ICOs. Half of them didn’t raise ANY money at all.

Maybe more will be discouraged from pursuing garbage fundraising attempts.

Report: Nearly Half of ICOs Failed to Raise Funds Since Start of 2017 - CoinDesk

Nearly half of all initial coin offerings (ICOs) in 2017 and 2018 failed to raise any funds, while another 40 percent raised more than $1 million each, a new research report claims.

Research and consulting firm GreySpark Partners studied the ICO market across the past several years, finding that as many as 890 token sales did not raise any funds at all. By contrast, according to the report (embedded below), 743 token sales were able to reach the $1 million mark.

GreySpark also noted that many token projects fail to provide a positive return-on-investment, particularly as time passes.
There’s a lot of ICO listings on this site that have me scratching my head wondering who would send money to them. Lots of words, sometimes not even making sense.
 

CryptoTC

Crypto Fat Cat
Staff member
Interesting that we’re starting to see IEOs and SEOs that look as scammy as 2017’s ICOs.

Let’s hope that trend doesn’t pickup steam. Crypto needs solid projects for steady growth. The last thing we need is a return to 2017 and the BS scams just repackaged.
They will prove to be nothing more than dressed up ICOs that will fail just as badly taking investors’ money with them. But hey, now the exchanges get to profit, too.
 
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