Recent ICO Scams and The People Behind Them

Initial coin offerings or ICO’s have been all the rage recently in the cryptocurrency world. ICOs enable companies to raise money by issuing cryptocurrency tokens that users can buy and trade at a later date on the cryptocurrency exchanges.

Basically, an ICO works just like an IPO – but rather than sell shares, companies use tokens with a promise from other companies to buy the tokens back when the product becomes successful and the value of the tokens increase.

Sounds like simple business sense right? Unfortunately, ICO scams like Cryptojacking, ransomware and ICO exit scams have become very popular in recent times tainting the industry and hurting many investors.

“4 out of 5 ICOs that took place in the last one year were ICO scams”

 

Recent ICO Scams and The People Behind Them!

Only 8% of ICO tokens end up in the exchanges revealed a recent research carried out by an ICO advisory firm called Satis Group. The result of this research is not good news for many investors…

  • 80% of ICOs are scams.
  • 8% ICO tokens end up in the exchanges.
  • 10% ICO funds are lost or stolen by cyber attacks.
  • 5% were dead deals.
  • 6% were classified as failed coins.

Some of these scams were made successful because of hackers, ransomware and even celebrities. Yes, celebrities!

Centra Tech ICO and Celebrity Endorsements – $32 million loss

Central tech was an ICO that paid for endorsements from prominent celebrities like DJ Khaled and Floyd Mayweather. In the first place, who takes ICO investment advice from a celebrity? Apparently, a lot of people trusted the face of these superstars and Centra Tech took advantage of this.

The company was incorporated in Delaware with headquarters in Miami Beach Florida by co-founders Robert Farkas and Sohrab “Sam” Sharma. They offered blockchain products like prepaid cards and wallet to store digital assets.

From July of 2017, $32 million was raised by selling Centra tokens called CTR tokens. These tokens were unregistered and the company went a step further to claim that it had an existing collaboration with Visa and Mastercard.

Centra Tech massively promoted the CTR tokens by making what is now known as “material misstatements” which deceived investors.

Unfortunately, the Centra ICO was illegal with no actual registration made with the commission so when the crackdown came, it came hard.

On April 2nd, 2018, the Centra ICO was flagged as fraudulent by the United States Securities and Exchange Commission (SEC). The founders were arrested for breaking federal laws and both men will be forced to return the ill-gotten gains including interest.

Steven Seagal is another celebrity that was caught in the crossfire of promoting an ICO that didn’t pan out. He publicly endorsed a cryptocurrency startup called “Bitcoiin”. Don’t confuse that with our beloved Bitcoin.

Seagal is the worldwide brand ambassador for the brand and took to his social handles to promote the product as well as keep fans updated on the progress of the ICO. However, on March 7th The New Jersey Bureau of Securities issued a cease-and-desist order to Bitcoiin ICO citing its unregistered securities.

The lesson to learn here is that celebrities and cryptocurrency do not mix. There are other ICO scams in recent times that are worth mentioning. Like the Pincoin token in Vietnam which was not endorsed by a celebrity but took the form of an ICO exit scam.

 

PINCOIN tokens – $660 million loss

Modern Tech is a Vietnamese cryptocurrency company that launched an ICO for their Pincoin token and raised $660m from about 32,000 people.

When the company first launched its token, they promised constant returns to investors. Afterward, they launched another token called iFan. The second token was meant for celebrities and was viewed as a social networking token.

At first, investors received cash until January 2018 when the company started paying out iFan tokens as rewards.

In no time, the people behind Pincoin disappeared like smoke. The team of 7 Vietnamese went from zero to multi-millionaires in a few months.

Savedroid “Over and out” – $50 million loss

Another recent ICO scam is Savedroid. It is owned by a German company that raised $50 million from direct funding and ICO.

The founder is known as Dr. Yassin Hankir who ended this ICO scam with a tweet saying “over and out”.

Savedroid came on the cryptocurrency scene with a unique perspective. Hankir and his team promised to use artificial intelligence to manage users investments and promised a crypto-backed credit card.

Savedroid ran smoothly for a few months and even had the appearance of legitimacy. The team opened an office and appeared in several events. However, their Twitter feed seemed to be constantly asking for investments. They wanted investors to participate in a #Airdrop program, unfortunately, some people fell for the scam. Despite all the warning signs, investors lost a lot of money.

Scam ICO Developers And Launching Services

Along the same lines as scam ICO’s, there have been documented complaints and investigations regarding ICO developers and launching services. Most of the scam ICO developers and launching services seem to be coming out of Sofia, Bulgaria.

Just before an ICO is about to go live, these scam launching services lock their clients out of their own backend, and try to extort money from them, or threaten them that their ICO won’t get launched. At this point if the client doesn’t pay the extortion, they lose everything!

TokenGet an ICO launching service out of Sofia Bulgaria, is under investigation for these exact allegations. The TokenGet Launching service was developed by BlockchainMob. The CEO of TokenGet and BlockchainMob Viktor Petrov, is also under investigation for threatening Mobilink-Coin with the same tactics as described above.

What Are The Newest Crackdowns on ICO Scams?

Regulatory bodies are beginning to take more notice of cryptocurrency scams and even though it is an unregulated industry, certain guidelines are being put in place to ensure that investors and crypto-enthusiasts are safe.

The Security Exchange Commission (SEC) has been involved in many recent crackdowns and issued cease and desist notices to suspected ICO fraud companies. This has come as a shock to many who believe that they don’t have the jurisdiction but let’s not forget that all ICOs are security offerings placing them under the purview of SEC.

Last month, SEC issued a large number of subpoenas to ICO issuers and gatekeepers who may be involved in transactions that do not comply with the federal securities laws.

What this means for past ICOs is simple: Fix the problem before the SEC finds you. Companies that have traded tokens to unaccredited investors or broken any securities law violations need to take action now.

Conclusion

ICOs are one of the easiest investments to make that is why many people want to be a part of it. However, not everyone understands the risks involved in ICO investment so before you plunge in to take up an ICO offer make sure to do your background investigation.

Find out who’s behind the company and the background of the offer. To avoid ICO scams, remember that all cryptocurrencies are risky and even though they offer huge returns in a short time, they also come with risks for investors.