2018-8-14 21:00 |
ICO exit scams have become a clear and present danger to the integrity of the cryptocurrency crowdsale paradigm. The prevalence of pump and dump ICO schemes threaten to scuttle the belief once held by investors in the potential of ICO token investments. According to a new report, exit scams have stolen approximately $100 million from investors.
The Scourge of ICO Exit ScamsA Chinese blockchain company has reportedly pulled the largest exit scam ever this past week. Shenzhen Puyin Blockchain Group in China ran three ICOs–ACChain, Puyin Coin, and BioLifeChain—and raised $60 million in total. Investigations are already being carried out by State Market Regulatory Administration (SMRA) in China, to look into these scams.
Shenzhen isn’t the only company involved in an exit scam recently, as NVO, another company, supposedly exit scammed last week. The company disappeared after raising 3000 BTC ($8 million at the time) to build a decentralized exchange and wallet.
There was also an exit scam by Block Broker which initially received a five-star rating on ICO review services such as TrackICO. It was later discovered that the CEO’s profile was that of an unaffiliated photographer. Block Broker showed its true self by running away with more than $3 million.
These pump and dump schemes are hard to recognize, and the few of them that have gone live have seen insufficient use.
Successful Exit Scams Almost at $100 MillionThe total amount of money lost to successful exit ICO scams is currently nearing a staggering $100 million. It’s easy for these blatant exit scams to thrive, as they plague the mostly unregulated ICO sector. Because of its unregulated status, founders are not bound by contract to deliver a product. The founders’ incentive to build a valuable company dwindles when they have raised millions of dollars without agreement.
However, most blatant exit scams are not hard to fish out if these schemes are paid due attention. Most of these schemes make unrealistic promises and run for a limited period. The majority of them also use fake profile pictures and plagiarize websites’ writings in their whitepaper. Other red flags include copied investor documents, fake promises of guaranteed returns, and bogus or missing executives.
Exit Scams Contributing to Ethereum Price DeclineThe prevalence of ICO exit scams as well as the rising trend of other “legitimate” projects cashing out their ETH held in reserve has lead to a massive decline in the price of Ethereum. Beginning on Monday, the price of ETH has been on a downward spiral and has dipped by more than 17 percent.
Such is the extent of the plunge that ETH is now trading below $300 for the first time since November 2017.
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