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Fraud? Scams? New Investigation Shows That Not All ICOs Should Be Trusted

Cryptocurrencies have become an essential part of the tech and startup scene, as they are widely used for multiple purposes. Furthermore, blockchain companies have increased in numbers in the recent months. Virtual currencies usually represent a huge part of these new and existing businesses, turning into one of the most powerful tools a company can have. They are either utility tokens with a specific application or equity tokens to raise funding. With this, initial coin offerings and crowdsales have boomed and become the standard. It is a reliable way for these companies to raise funding and spread the word about their product. However, a recent Wall Street Journal Investigation has revealed that a lot of these ICOs are in fact scams or frauds.

According to the WSJ, who has looked at 1450 ICOs, 271 were deemed to be frauds or qualified as deceptive. Frauds and scams have been quite common in the crypto space with examples like exchange platform Bitconnect who received multiple cease and desist letters before shutting down, resulting in thousands of investors losing their money.

The WSJ explains that they have determined these ICOs to be scams or frauds after noticing multiple alarming signs in whitepapers, websites, and list of advisors and employees. One recurring theme was plagiarism. Numerous whitepapers were repeating, and sometimes even copying word for word, other existing ones. Some were not mentioning any employees or team members, which is usually an important component for potential investors. The investigation also found that when team members were mentioned, they often didn’t exist or the companies were using real identities of people who did not take part in the ICO, which is identity theft.

Another huge red flag for the Wall Street Journal was that a lot of these ICOs were promising huge returns for investors, which seemed too good to be true. These companies were advancing that risks were minimal and that potential for profit was colossal. The SEC is strongly fighting against this sort of declaration in any industry. Companies were mentioning on their websites that investors could obtain returns every week, with high profits and no risk. Promises such as “double your money easily” are clearly a red flag that indicates potential scams.

Many of the investigated ICOs have already been banned and shut down. Multiple lawsuits have been filed, as investors hope to get their funds back.

As cryptocurrencies increasingly became popular over the past months, the U.S. Securities and Exchange Commission (SEC) has been actively fighting against and telling investors to be wary of fake and fraudulent ICOs. And what would be the best way to do so? They simply created a replica of a fake ICO website to show what it usually looks like. However, after clicking on the “Buy Now” button, users are redirected to a website explaining scams and how to avoid them.

This is one of the first major investigations of ICOs and results are alarming. There are multiple ways to ensure that the ICOs users invest in are not scams or frauds. A good advice is to read the whitepaper, do your own research, and never invest more than you are willing to lose. Moreover, one can only ask: will government officials and lawmakers across the world start regulating ICOs and token sales to avoid these scenarios in the future?

TLDR: The Wall Street Journal has investigated over a thousand ICOs and found that many of them were frauds or scams. A lot of investors have lost money and many have already filed lawsuits.


Zachary Gian is a cryptocurrency news writer and editor from Paris, France. He has always been passionate about technology and innovation since a young age, and loves to share his passion with others. He firmly believes in the blockchain and in digital currencies and is enthusiastic about their development.

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