Fraud in ICOs ‘remains very real problem’

The number of “dead” tokens on the cryptocurrency market has topped 1,000.

Daria Generalova, Co-founder of ICOBox, an initial coin offering (ICO) crowdsale facilitator, analysed data from Coinopsy and DeadCoins, which keep track of tokens that have disappeared. “Unfortunately, fraud in ICOs remains a very real problem, so I am not surprised by the number of ‘dead’ tokens,” says Generalova.

Warning signs that an ICO is a scam include the project stops showing up in industry media; its official website and social media accounts stop being updated; its community activity drops off sharply or there is a mass exodus of developers and advisers; the project founders are in no hurry to release their tokens on exchanges; and the deadline for completing the next stage is constantly pushed back.

“All of these actions, separately or in combination, are capable of eroding the value of even the strongest coins,” warns Generalova. “Naturally, all of this has a very negative effect on the market, scares off possible token holders, leads to litigation, market panic, and to perfectly reasonable responses on the part of governments and regulators.”

Generalova believes scams are driving the current outflow of funds from the market and the fall in value of cryptocurrencies. “The only heartening thing that can be taken from this is that more market players are starting to understand this problem, to study projects and the biographies of their founders carefully before funding them, or to turn to large, established providers of SaaS solutions,” he adds. “The days when you could collect funds based on a whitepaper alone are over. Now you need to prove to everyone that you really have something special.”

Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.

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