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Investors Have Placed $1 Billion in Cryptocurrency Offerings Rampant With Red Flags For Fraud (cnbc.com)

Posted by msmash on from the red-flag dept.

Investors have sent $1 billion into digital coin projects that flash warning signs for fraud, The Wall Street Journal reported Thursday. The revelation comes a day after the SEC created its own fake ICO to teach investors a lesson. From a report: In a review of 1,450 digital coin offerings, the Journal said it found 271 bore red flags such as plagiarized documents or fake executive information. Investors have already claimed losses of up to $273 million in these projects, the newspaper said, according to lawsuits and regulatory actions. The coin sales, or "initial coin offerings," give investors the chance to buy into a new digital token while letting developers get easy access to funding. The process may be a little too easy for many projects that are unproven or outright scams.

Coin offerings have raised roughly $9.8 billion in the two years through mid-March, according to financial research firm Autonomous Next. The Journal found widespread plagiarism in 111 projects' online whitepapers, including word-for-word copies of marketing plans and technical features.

49 comments

  1. no they haven't by Anonymous Coward · · Score: 0

    Some of the total of the money probably comes from the ICO scammers themselves. Investing into their own scam to give it legitimacy, and possibly to claim loss on top.

    1. Re:no they haven't by Kulahan · · Score: 1

      [CITATION NEEDED]

    2. Re: no they haven't by Anonymous Coward · · Score: 0

      [Ability to accept opinions in an informal duscussion needed]

  2. But BLOCKCHAIN! by Anonymous Coward · · Score: 0

    BLOCK! CHAIN!

    1. Re:But BLOCKCHAIN! by Anonymous Coward · · Score: 0

      bitcoin touched my junk liberally. he strapped me in to his slashdot cruiser and he couldnt keep his offensive hands off of me. he was performing many red flag touches. i couldnt believe what the fuck was going on. i told bitcoin the city would not approve of a zillionaire touching an underage kid for free.

      can you believe it? bitcoin did all this. he picked me off the street, strapped my arms and legs down in the slashdot cruiser passenger seat, and just wouldn't stop fondling my wallet.

      they definately were red flag touches. the goddamn referee he had in the back seat kept on raising up this red flag every time he touched my junk but did bitcoin care? NO WAY! he just kept on doing it. I couldn't believe what the fuck was going on, indeed. I pleaded with bitcoin but to no avail. I told him the city would not approve of such a wealthy man touching an underage kid like me (at the time I was 13) without at least compensating me for the trauma and the use of my body as his own personal plaything.

      this got to him, worrying about his image. he continued to fondle me, all the while ignoring the referee's red flags. then he drove the slashdot cruiser to my house and ejected the seat i was in! it was amazing. but surprisingly, after I woke up the next morning, my bank account had B$150k in it!!! Can you believe it????????????

  3. Oh yeah? by DontBeAMoran · · Score: 2

    Well I'll make my own scam coin! With blackjack and hookers!

    --
    #DeleteFacebook
    1. Re:Oh yeah? by Anonymous Coward · · Score: 0

      #Whorecoin!

    2. Re:Oh yeah? by Anonymous Coward · · Score: 0

      In Fact Forget the Scam Coin!

    3. Re:Oh yeah? by Nidi62 · · Score: 2

      Well I'll make my own scam coin! With blackjack and hookers!

      I will gladly buy 100 Nixonbucks worth of your Bendercoins. Much better than buying 100 cups of coffee.

      --
      The only thing necessary for evil to triumph is for it to be pitted against a slightly greater evil
    4. Re:Oh yeah? by Anonymous Coward · · Score: 0

      BenderCoin

      WHEN MOON?

    5. Re:Oh yeah? by Anonymous Coward · · Score: 0

      #Whorecoin!

      BitStormyCoin perhaps?

  4. What tipped you off? by mcmonkey · · Score: 3, Funny

    In a review of 1,450 digital coin offerings, the Journal said it found 271 bore red flags such as plagiarized documents or fake executive information.

    The article continues...

    "The Journal found the other 1179 offerings bore red flags such as THEY WERE DIGITAL COIN OFFERINGS."

    Seriously, if you ever thought the story of Jack and his magic beans was fiction, just look at these digital magic beans.

  5. "As seen on TV" by Rick+Schumann · · Score: 2

    More and more all these various 'cryptocurrencies' are starting to remind me of the 'limited edition gold coins' and 'collectible coins' sold on the x.2 and x.3 (and so on) broadcast TV channels. They're not really worth more than the metal they're made out of but they try to convince you they're going to be worth orders of magnitude more than you're paying for them.

    1. Re:"As seen on TV" by HornWumpus · · Score: 1, Interesting

      The best was the Obama inauguration commemorative coins. Four for $30.

      They were nickels with stickers attached.

      It is an immoral act to let a sucker keep his money.

      --
      John McAfee 'It was like that time I hired that Bangkok prostitute; to do my taxes, while I fucked my accountant'
    2. Re:"As seen on TV" by Anonymous Coward · · Score: 0

      Excellent analogy!
      Cryptocurrencies are worth no more than a piece of toast with an image of the Virgin Mary on it - i.e. whatever anyone would pay for it.

    3. Re:"As seen on TV" by PolygamousRanchKid+ · · Score: 1

      More and more all these various 'cryptocurrencies' are starting to remind me of the 'limited edition gold coins' and 'collectible coins' sold on the x.2 and x.3 (and so on) broadcast TV channels.

      Yes! Sell me a Ginsu Knife and Spiral Slicer Coin!

      These processes existed way back in the 70's!

      --
      Schroedinger's Brexit: The UK is both in and out of the EU at the same time!
    4. Re:"As seen on TV" by Anonymous Coward · · Score: 0

      Diamonds are the same way. The ads try to give them value. However, if they are so valuable, then why do few jewelers really care to buy the stones at something other than bargain basement rates?

      I see places hawking gold on those channels all the time. If gold were really valuable, they would be buying it, not hawking craptastic coins that are worthless as an investment. (If I want to invest in gold, I'll use bars so I don't pay a huge amount over spot price.)

    5. Re:"As seen on TV" by DontBeAMoran · · Score: 1

      How about a piece of toast with an image of Darth Vader on it?

      --
      #DeleteFacebook
    6. Re:"As seen on TV" by tlhIngan · · Score: 3, Interesting

      More and more all these various 'cryptocurrencies' are starting to remind me of the 'limited edition gold coins' and 'collectible coins' sold on the x.2 and x.3 (and so on) broadcast TV channels. They're not really worth more than the metal they're made out of but they try to convince you they're going to be worth orders of magnitude more than you're paying for them.

      Actually, a lot of them are real. Just you can buy them from the Fed for about 1/5th the cost normally. They are only "collectible" in the sense someone paid a lot of money to make an ad for them thinking you can only get it from them. But your local bank should be able to order in a roll for you for basically face value (they may be gold coins, but the gold content is nowhere near their face value). So the ad might sell you a roll of 20 $1 gold coins for $100 as "collectible" (they are limited - once the feds stop pressing, they're no more). Or you bank can get them for $20 or so.

      Of course, it also plays on the "limited" part and "collectible" part. Just because something is limited, rare, or collectible, doesn't make it valuable. After all, the Fed just prints a new coin the next year and the scam repeats again.

    7. Re:"As seen on TV" by rtb61 · · Score: 1

      You know what I am hearing, 'watch the fuck out the end is nigh'. This sounds like the typical press release media backup and corporate support for a war. That increasing frequency of targeted news, associations of threat and imminent major harm. The other against whom a war must be fought, the other in this case, 'unbacked crypto currencies'. It seems like the decision has most definitely been made and the preliminaries are being deployed with a view to action taken which would have a zeroing affect on worth in legal terms (illegal transaction only). Unbacked needs to be eliminated to make way for backed with assets and no competition will be tolerated.

      --
      Chaos - everything, everywhere, everywhen
  6. What are you saying? by Anonymous Coward · · Score: 0

    I should have set up my own scam-ICO?

  7. Fools and Money by Zorro · · Score: 2

    You don't have to be smart to be Rich.

    But it helps if you want to keep it.

    1. Re:Fools and Money by PolygamousRanchKid+ · · Score: 2

      But it helps if you want to keep it.

      It's a great tax savings plan:

      Set up your own scammy ICO in a fake name.
      Buy it all up yourself.
      Transfer the cash to the Cayman Islands.
      Reveal the ICO to be a scam, and claim the losses on your taxes.
      Profit!

      I have this terrible feeling in my gut that all this speculation will incite yet another banking crisis. In order to avoid complete devastation, the government will do a bailout.

      Guess who gets to pay for the speculators losses . . . ?

      --
      Schroedinger's Brexit: The UK is both in and out of the EU at the same time!
    2. Re:Fools and Money by slew · · Score: 2

      But it helps if you want to keep it.

      It's a great tax savings plan:

      Set up your own scammy ICO in a fake name.

      Buy it all up yourself.

      Transfer the cash to the Cayman Islands.

      Reveal the ICO to be a scam, and claim the losses on your taxes.

      Profit!

      I have this terrible feeling in my gut that all this speculation will incite yet another banking crisis. In order to avoid complete devastation, the government will do a bailout.

      Guess who gets to pay for the speculators losses . . . ?

      People were using this tax scam long before ICOs...

      To partially counteract this, the IRS limits passive loss write-off to at most the passive gains you report in a tax year. This means you could avoid paying about 1/2 the taxes on your legitimate investments in the best case...

      Why 1/2? Because you could taken that money you used to declare a loss and invested it in your actual investments and presumably doubled the gain.

    3. Re:Fools and Money by bobbied · · Score: 1

      You don't have to be smart to be Rich.

      But it helps if you want to keep it.

      John Wayne said it this way..

      Life is hard..

      Being stupid, makes it harder.

      --
      "File to fit, pound to insert, paint to match" - Aircraft Maintenance 101
  8. I have an inital tulip offering by Anonymous Coward · · Score: 1

    Invest in these special bulbs and watch them grow your profits literally. You can even buy them with cryptocurrency.

    1. Re:I have an inital tulip offering by pegacat · · Score: 2

      Too Late, it's been done - check out 'TulipCoin' at https://tulipcoins.github.io/

      PonziCoin was also very 'successful'.

      It seems to be at the stage where the fish will bite on bare hooks, with no bait, and a large sign attached saying 'warning, this is a hook'.

      --
      Wer mit Ungeheuern kämpft, mag zusehn, dass er nicht dabei zum Ungeheuer wird.
  9. oh the inhumanity by Kulahan · · Score: 2, Insightful

    oh no people that are investing in something they don't understand at all are getting screwed over as a direct result of their lack of knowledge

    1. Re:oh the inhumanity by bobbied · · Score: 1

      oh no people that are investing in something they don't understand at all are getting screwed over as a direct result of their lack of knowledge

      Your winnings sir!

      --
      "File to fit, pound to insert, paint to match" - Aircraft Maintenance 101
  10. The World's Largest Pyramid Scheme by Anonymous Coward · · Score: 2, Funny

    "It's not a pyramid scheme, Frank! It's an inverse wealth funnel!"

  11. All cryptocurrencies and ICOs are scams by Anonymous Coward · · Score: 3, Insightful

    Are (any) fiat-currency and (any) cryptocurrency really equivalent, as cryptocurrency fans claim?
    For example, US Dollar and Bitcoin are really equals?
    Value/validity/authorization of US dollar is provided/guaranteed by US Government (and in-turn whole US Public)!
    Also, not to mention, US Dollars in any US Bank is insured by US Government!
    What authorization/guarantee/insurance is behind Bitcoin? Nothing!
    Sorry but that is the end of discussion then!

    Why do you think Satoshi Nakamoto is really hiding his identity, if Bitcoin is really such a great innovation?
    He is just someone does not like media/fan attention?
    Or, could it be really because Bitcoin (and all cryptocurrencies followed it) are actually Ponzi Schemes?
    (So he knew very well that law enforcement would come after him sooner or later?!)

    If so-called cryptocurrencies are really good innovation, why they attract so many criminals/criminal activity?
    Could it really be because, all cryptocurrencies themselves are scams, and that is why they attract all kinds of criminals/criminal activity?

    If so-called cryptocurrencies are really currency, why no company/store can use Bitcoin as currency anymore?
    Because the price of Bitcoin proved to be extremely unstable to use as a currency?
    Would the result be different, if Bitcoin replaced by any other "cryptocurrency"?
    Aren't all work the same way?

    If so-called cryptocurrencies are really money; isn't people issuing their own money, illegal already, in all countries?
    If so then, why they are still not banned in all countries?

    Or, they are not actually virtual currency but virtual investment?
    But, if they are actually investment, why we need/want them?
    What would happen to world economy, if people invested in virtual investments, instead of real investments?

    Or, all so-called cryptocurrencies are actually just a modified (made decentralized and paying variable interest) Ponzi Schemes?
    (Price of cryptocurrencies would keep increasing in the long term (by their design), so it is equivalent of paying variable interest to all long term investors.)

    As more and more people invest in cryptocurrencies, it will become harder and harder to ban their trading everywhere!
    All cryptocurrencies need to be banned globally before it is too late!

    1. Re:All cryptocurrencies and ICOs are scams by rot16 · · Score: 1

      Well, insightful rant it is.

    2. Re:All cryptocurrencies and ICOs are scams by Anonymous Coward · · Score: 0

      On the contrary:

      1: Bitcoin's value will only go up. They can't be printed at a whim.
      2: It is a proven standard of value.
      3: They are a secure currency. No hacker is going to start being able to make coins willy nilly.
      4: The Lightning Network is pretty much a perfect way to do transactions without penalities.
      5: No worries about anonymity. Just tumble your coins, and you are home free.

    3. Re:All cryptocurrencies and ICOs are scams by Anonymous Coward · · Score: 0

      I'm trying to tell if this is a troll post or not. If it is, well done.

      But as to points 1 and 2, just pull up the exchange history to disprove both of them. It's got a high volatility value, which doesn't not prove its standard of value, and I believe it's currently dropping in value, it happens quite often, and we're currently running at less than half the max value it ever achieved. And to that, its value always going up isn't a positive when you're talking about currency. Economies can only function if money exchanges hands. A currency whose value always increases doesn't lend itself to being spent. As such, that economy is doomed to collapse.

      To point 3, the numerous number of wallets that have been hacked pretty much shits all over that claim. And point 5, it's as anonymous as TOR. If somebody is dedicated enough, they can trace the transactions to a person through the public ledger. It just might take a bit of sleuthing.

      To point 4, I'm not familiar enough with the lightening network to comment.

    4. Re:All cryptocurrencies and ICOs are scams by Anonymous Coward · · Score: 0

      BTC wallets are one thing. Those are endpoints, likely poorly secured. The BTC coins themselves and their crypto infrastructure have been secure. Claiming BTC is insecure is claiming that dollars are insecure because someone got mugged and had their cash taken.

    5. Re:All cryptocurrencies and ICOs are scams by Comrade+Ogilvy · · Score: 1

      "They can't be printed at a whim."

      Nope.

      (A) Forking is a kind of "printing" on a whim. It is obviously true about any soft fork. It is arguably true about a hard fork, too.
      (B) New cryptocurrencies can very easily be printed, and all can potentially directly compete with Bitcoin (in a way that Mexican pesos will never directly compete with the USD).

    6. Re:All cryptocurrencies and ICOs are scams by bobbied · · Score: 1

      Well... It's more like the exchange is a bank you left your money with. It has no guards, locks or tellers.

      Thieves just show up and rifle though the cash drawer and vault taking what they can find, which is usually what the bank owner forgot to take.

      --
      "File to fit, pound to insert, paint to match" - Aircraft Maintenance 101
  12. Do any "real" coins work this way? by mcmonkey · · Score: 1

    I interrupt the regularly scheduled nay-saying and fun-poking for a question.

    Are there any real, legitimate crypto-coins that got started by an initial offering?

    I'm not Bitcoin expert, but my impression was you can only get coins from "Bitcoin" through mining. Private parties will sell bitcoin or exchange them for goods and services, but if you want coin directly from "Bitcoin" or where ever coins originate, to be the first owner of a bitcoin, you must mine it. You cannot buy it.

    1. Re:Do any "real" coins work this way? by angel'o'sphere · · Score: 1

      Are there any real, legitimate crypto-coins that got started by an initial offering?

      Several thousands probably. More than 100 I could probably count in my mind ...

      Most coins don't work like Bitcoin. They have no "mining".

      Here you see about 1500 coins and their market cap: https://coinmarketcap.com/all/...

      --
      Cost free eBook I read (by iBook/Kobo/Amazon/ObookO/Gutenberg etc.): "The Green Odyssey" by Philip Jose Farmer.
    2. Re:Do any "real" coins work this way? by TeknoHog · · Score: 1

      Most coins don't work like Bitcoin. They have no "mining".

      I'm really disappointed to see this is actually true, as seen at Coinmarketcap (specifically, the "not mineable" marker). However, legitimacy is rather subjective here. With Ethereum for example, it's relatively easy to set up your own system of tokens that piggyback on another blockchain. So the number of useless coins is easily inflated to skew the statistics.

      Of course, it's likewise possible to fork Bitcoin into yet another useless but technically legitimate altcoin. But with Ethereum it's doubly questionable because the primary blockchain is known to have the occasional rollback/bailout.

      In my book, a legitimate cryptocurrency must be fully open source and decentralized, while a lot of coins out there are neither. In practice, decentralization means some kind of mining, though it doesn't have to be power-hungry proof-of-work as in Bitcoin. Check out Peercoin, for example.

      --
      Escher was the first MC and Giger invented the HR department.
  13. Getting in at the bottom by Anonymous Coward · · Score: 0

    I think many of these people don't care if it's a scam or not. As long as they think they can get rich off it anyway. Because the entire market is based almost entirely on speculation rather than practical value. So they think if they can get in early, watch the price rise, then get out before the scam folds, they'll make money. They'll still complain when they get caught in the trap though.

    1. Re:Getting in at the bottom by Alypius · · Score: 1

      This is largely why I stick with CureCoin. I get a few coins inreturn for letting my gear fold proteins and do God-knows-what other medical research for the Folding@Home team. I'm more interested in contributing to research, but if they want to give me the crypto-equivalent of a beer every couple of weeks, I'm a happy guy.

  14. Re:Fraud? by Anonymous Coward · · Score: 0

    Bitcoin, Litecoin, Monero, Dash, Reddcoin, Dogecoin, Mooncoin, Flappycoin. Yay!

  15. Only 10% were caught .. by Anonymous Coward · · Score: 0

    Which means the rest are doing it correctly, right?

  16. Oh wow! by DaMattster · · Score: 1

    This isn't good at all. Once this cryptocurrency bubble pops, it will make the real estate bubble look like a tiny soap bubble by comparison. If this happens, and I am not religious, god help us all.

    1. Re:Oh wow! by bobbied · · Score: 1

      The part of this that makes me squirm is that I actually heard a home equity lender advertising that you could borrow to play the latest crypto currency... So it could be BOTH crypto currency AND real-estate at the same time.

      It could be bad. Hold onto your cash and be ready to buy on the dip... Not Crypto you dolts, Real Estate, buy Real Estate...

      --
      "File to fit, pound to insert, paint to match" - Aircraft Maintenance 101
  17. So... by ceoyoyo · · Score: 1

    So some kids download a bit of software, put up a website, make up some fake execs, and advertise an "ICO" and idiots give them millions of dollars?

    I am clearly in the wrong line of work.

  18. http://www.youtubetoconvert.com by Anonymous Coward · · Score: 0

    nice
    if you want download online video from youtube then click right here http://www.youtubetoconvert.com/Youtube-Video-Downloader