Jordan Belfort, whose memoir was the basis for the “Wolf of the Wall Street” film, warned that promoters of ICOs were "perpetuating a massive scam of the highest order on everyone.”
Initial Coin Offerings (ICOs) is an unregulated and progressive form of fundraising that trades future cryptocoins in exchange for cryptocurrencies that have an immediate and liquid value. This is done to fund early-stage startup development. More than $3 billion has been poured into 202 ICOS by investors this year. Moreover, $36 million was raised in just the first quarter of 2017.
“Promoters are perpetuating a massive scam of the highest order on everyone...It is such a huge gigantic scam that’s going to blow up in so many people’s faces”
The Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) have been warning for months that ICOs are largely unregulated and could be fraudulent. A report recently released by CFTC warned potential investors to "conduct extensive research before giving any money or personal information to a virtual currency platform." The SEC has charged an ICO operator, Maksim Zaslavskiy, with fraud relating a real estate firm and diamond club which had no actual operations.
Currently the SEC is not the only one issuing warnings regarding ICOs. A convicted fraudster, who spent 22 months in jail for securities fraud and money laundering, is also speaking out against ICOs. Most notably, China also has banned ICO funding. British regulators have said that investors should be prepared for the value of their tokens to drop to zero.
Belfort compared the current excitement for ICOs to the “blind pools” of the 1970s and early 80s, when funds were being raised from investors without the brokerages disclosing how exactly the money would be spent. He told the paper that most likely, 85% of people in the cryptocurrency market do not have bad intentions, but what matters is that it will be a complete disaster even if just 5-10% turn out to be a scam. According to him, people should have been a bit more cautious before investing millions of dollars in ICOs. “It’s far worse than anything I was ever doing," he concludes.