Consumers lost nearly $ 100 million for ICO exit scams


A common criticism that viewers have for the cryptocurrency industry is that it is full of scams and criminal crimes. While this is often an unjustified blanket classification of this nascent industry, the research done by Diar, a weekly publication focused on fintech, states that there are still some bad actors present in this area

According to the Diar report from last week, the ICO release scams have grossed around $ 96.8 million in the last two years. While this is a staggering figure in itself, it has been reported that about 70% of these funds have been stolen in the last two weeks, with the culprits being four different projects run by two "companies".

[19659002] The first company is Shenzhen Puyin Blockchain Group, a shady cryptocentric company based in the Chinese province of Guangdong, which is reportedly managing three ICO scammers – ACCHAIN, BioLifeChain and PuyinCoin – that collected over $ 60 million funds collectively.

As pointed out by the eagle-eyed users on Reddit, the office where the team of the three aforementioned ICOs were supposed to remain is empty, clearly indicating that something was wrong. Eventually, when the news of this scam spread, China's State Regulatory Market Administration (SMRA) took over these projects and society.

The second company was NVO, which raised nearly 3,000 Bitcoins to "build" a decentralized exchange system and cryptocurrency portfolio before disappearing altogether.

While the publication did not go into many details about the other 10 scams listed, there was one that stands out, being Block Broker. Ironically, Block Broker was founded in an attempt to "completely eliminate ICO fraud by creating a 100% safe investment environment."

Everything looked good and good, with ICO review sites like Trackico, posting a multitude of rave reviews for the project. However, when it was revealed that the resemblance of the project's CEO was nothing more than a stolen photo, it became evident that BlockBroker was a scam that posed as a "scam" scam. Unfortunately, when the show occurred, it was too late, with the numbers behind the project running away with $ 3 million.

As the publication notes, the use of "false profile images" is a common practice with outgoing scam projects, along with plagiarism of promotional materials and white papers, which should be focused on show a symbolic or project value instead of the damaging copy and paste action.

Although these projects – or more accurate scams – are clearly wrong, the aforementioned report reveals that the incentives around an ICO offer are inherently imperfect, writing:

"It is not surprising that the blatantly out-come scams continue to plague the largely unregulated ICO sector, where the founders have no contractual obligation to deliver a product.After having collected millions of dollars without any restrictions, the founder's incentives to actually build a precious company are very limited. "

Although this is a powerful statement per se, as it clearly highlights the problem with the crowdfunding structure of the ICO adding insult to injury, the report drew attention to another issue in the following statement:

"Even if the founders were to build a valuable business, it is not clear at best if the utility token price reflects the success of

This statement brings a much more fundamental problem to light, where cryptocurrency projects can often be overvalued, as investors try to do

Despite the theory that scams are probably a minority in the ICO pool , like Ethereum World The news reported that many projects that are managed in good faith can not meet the promises advertised in their white papers, including the claims on decentralization.

While this problem could start to finance and, with the development of blockchain technology advancing at an incessant pace, the aforementioned problems with the ICO structure still prove to be a problem in today's cryptosphere.

Photo of Fancycrave on Unsplash

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