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Three major ICO scams made up the majority of crypto fraud in 2017: report

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Peter Terlato
Posted: 12 July 2018 2:14 pm
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Approximately one tenth of total ICO fundraising, or $1.3 billion, was appropriated by fraudulent projects.

A new cryptocurrency research report has revealed that the overwhelming majority of initial coin offerings (ICOs) last year were determined to be scams, while only a small fraction successfully traded on an exchange.

Cryptoasset Market Coverage Initiation: Network Creation, released by Satis Group, is the second research note published as part of a five-piece series covering the burgeoning cryptoasset market.

The report found that more than three quarters (78%) of ICOs listed in 2017 were “identified scams”. The research described these as having or had “no intention of fulfilling project development duties with the funds, and/or was deemed by the community (message boards, website or other online information) to be a scam”.

We found that approximately 78% of ICO’s were identified scams, 4% failed, 3% had gone dead, and 15% went on to trade on an exchange.

Cryptoasset Market Coverage Initiation: Network Creation breakdown of ICO fundraising

However, of the $12 billion raised to-date by ICOs, only $1.3 billion (11%) of funding was appropriated by identified scams. A similar amount, $1.7 billion (14%), was lost to failed projects, while $624 million (5%) went to those that had gone dead. More than $8 billion (70%) went to ICOs that ended up trading on an exchange.

Despite over one tenth of all ICO fundraising being profited by identified scams, most of the funds were claimed by three projects; Pincoin ($660 million), Arisebank ($600 million) and Savedroid ($50 million). All of these fraudulent projects have since become subject to extensive regulatory action, according to the report.

For example, in late January the state of Texas effected a cease and desist order against Arisebank, after it claimed to be a “cryptocurrency bank”, disclosing that they must no longer offer their services to consumers.

The report also revealed that ICO fundraising for token-operated networks has grown steadily over the last year. The study estimated that ICOs raised over $7 billion in global funding year-to-date. This is equivalent to almost 50% of the amount raised throughout the entirety of 2017, despite bitcoin’s substantial price decline. The global ICO market is equivalent to one fifth (20%) of the United States’ initial public offering (IPO) market.

A separate digital currency study released earlier this week revealed that of the thousands of ICOs that were completed before May this year, a little more than half failed within the first four months of listing.

The Federal Trade Commission (FTC) has reported that in the first two months of 2018, consumers were defrauded out of $542 million in cryptocurrency scams and will lose a total $3 billion by the close of the year.

However, trading giant eToro suggest that cryptocurrencies could replace fiat currency in as little as a decade.

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

    Crypto explained

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