Startups have raised over $3 billion through “initial coin offerings” so far this year.
VC warns that market is a magnet for scammers looking to make quick money.
Calls for regulation and self-policing, with a new manifesto for ICO standards issued in London.
LONDON — Concerns are growing that the recent boom in “initial coin offerings” (ICOs) could leave many investors burned by scammers looking to make easy money.
Initial coin offerings, or ICOs, are a new form of online fundraising. Startups issue digital coins or tokens in exchange for real money used to fund projects. ICOs have become hugely popular this year, with over $3 billion raised using the method in 2017 so far.
Michael Jackson, a venture capitalist at Mangrove Capital, told Business Insider: “The danger with ICOs is that the boiler room is resurrected.”
Jackson warned that the market is “a complete Wild West,” with no controls on how ICOs can be pitched to investors and evidence of scams in the market.
Boiler rooms are brokerages that sell stock over the phone using dishonest tactics or outright lies, essentially ripping off investors to get a commission for themselves. A good example is the office in the film Wolf of Wall Street. The man behind that real-life incident the inspired the film this week said ICOs are “far worse than anything I was ever doing.”
Jackson expressed alarm that many ICOs were being advertised on social media platforms like Twitter and messaging app Telegram. Adverts on these platforms often emphasis demand for the investments they are selling without warning of the risks associated.
For example, the white paper for ElectraCoin contains the lines: “Connect with your community and increase your wallet when your coin price increases exponentially allowing interest toward a bright future.”
“We strongly recommend that you do not invest your life savings. We …read more
Source:: Business Insider