Nearly Twenty Percent Of ICO Companies May Engage In Fraud – Wall Street Journal Report

ICO News, Investing, News, Regulation | May 17, 2018 By:

Nearly one in five firms raising money via initial coin offerings (ICO) are using deceptive or fraudulent tactics to lure investors, according to a Wall Street Journal investigation.

The media outlet reviewed documents for 1,450 digital coin offerings and discovered 271 with so-called “red flags” that include plagiarized investor documents, promises of guaranteed returns, and missing or fake executive teams. Those dicey 271 companies represent investments of more than one billion dollars, a figure derived from transaction records and company statements.

Some of the 271 firms have already been closed, while others are still raising money. Investors have suffered $273 million in losses on the projects, the WSJ reported.

Increased regulatory scrutiny has somewhat cooled the ICO and tokenization markets, with many government regulators warning about deals that may be targeting unwary investors. The SEC published a fake white paper on Wednesday to illustrate the problems it is targeting. The SEC has filed four separate cases involving alleged ICO fraud this year, with at least a dozen companies backing away from ICOs when the SEC questioned them.

The WSJ journal claimed that at least 121 of the examined ICO projects they flagged didn’t disclose the name of a single employee. Several also made up team members out of thin air, borrowing images from other sites and stock footage to create phony employee identities. The Journal also flagged two dozen companies that promised financial rewards without risk, an SEC violation.