Even as the initial coin offering (ICO) frenzy shows no signs of stopping, warning signals are already showing up on the horizon. According to Chainalysis, a New York-based maker of anti-money laundering software, phishing scams related to ICOs have cost investors $225 million in ethereum-related cybercrime. Specifically, the firm estimates that more than 30,000 people have lost an average of $7,500 each.
The modus operandi of scammers is simple: prospective investors are asked to send payments to bogus IP addresses that masquerade as funding sites for ICO tokens. Some have also hacked into established ethereum projects, such as the Decentralized Autonomous Organization (DAO), to make away with cash. In an interview with Fortune magazine, Chainalysis cofounder Jonathan Levin said that his firm's estimate of the scammed amount does not include bitcoin-related cybercrime because such attacks are on individuals rather than the group of people targeted by ICO phishing scams. (See also: How Companies Use Initial Coin Offerings.)
(SEC) published a warning recently regarding ICOs of publicly
companies. "Fraudsters often try to use the lure of new and emerging technologies to convince potential victims to invest their money in scams. These frauds include '
schemes involving publicly traded companies that claim to provide exposure to these new technologies," the agency wrote. (See also:
In "pump-and-dump" schemes, market players pump up the price of a micro-cap stock by spreading false news and misinformation about its digital currency exposure and ventures. They begin dumping the stock once it reaches a certain target. The SEC has already suspended trading in four companies – First Bitcoin Capital Corp., CIAO Group, Strategic Global and Sunshine Capital – because they "made claims regarding their investments in ICOs or touted coin/token-related news." According to some estimates, ICOs have raised as much as $1.6 billion this year. (See also: Blockchain ICO Offerings Have Outpaced VC Funding This Year.)