Fraud | Blockchain and Cryptocurrency Course: What You Need to Know | 2019

TL;DR

Fraud is pervasive in the world of Initial Coin Offerings, with indicators such as plagiarized white papers, nonexistent employees, lack of functioning websites, and guaranteed financial returns.

Transcript

many people ask how common is fraud in the world of initial coin offerings my answer is it's very common in fact i think it's quite pervasive the wall street journal did a very interesting analysis of 1450 icos where they're able to get white papers white papers are the documents that icos distribute on the internet to try to persuade people to sen... Read More

Key Insights

• 🖤 Fraud is widespread in the world of Initial Coin Offerings, as indicated by plagiarized white papers, lack of employee transparency, absence of functioning websites, and guaranteed financial returns.
• 👮 The failure to register ICOs with the SEC results in violations of federal securities laws and potential legal liabilities.
• 🤍 Significant discrepancies between white paper promises and actual coding of tokens and coins highlight potential fraudulent practices.
• 👾 The ICO space lacks proper regulations and oversight, making it susceptible to fraud and deceptive practices.

Questions & Answers

Q: How pervasive is fraud in the world of Initial Coin Offerings (ICOs)?

Fraud is quite common in the ICO space, and it is considered pervasive by many experts. The analysis of 1,450 ICOs by The Wall Street Journal revealed significant indicators of fraud.

Q: What are some red flags of fraud in ICOs?

The Wall Street Journal identified several red flags, including plagiarized white papers, the absence of employee/founder disclosure or the existence of fictional people, lack of a functioning website, and the promise of guaranteed financial returns.

Q: What legal implications can arise from unregistered ICOs?

The failure to register ICOs with the SEC, as found in the analysis, constitutes a violation of federal securities laws. It exposes the organizations to potential legal liabilities and gives investors the right to request a return of their initial purchase.

Q: How accurate are the promises made in ICO white papers?

Researchers at the University of Pennsylvania found major discrepancies between the promises made in white papers and the actual coding of tokens and coins in 80% of the 50 largest ICOs in 2017. This suggests that purchasers often did not receive what was promised to them.

Summary & Key Takeaways

• The Wall Street Journal analyzed 1,450 Initial Coin Offerings and found that 111 of them had plagiarized segments in their white papers, 121 had no disclosure of employees/founders, and 48 had no functioning website.

• In 25 cases, a guaranteed financial return was promised, which is a red flag for fraud.

• Failure to register these offerings with the Securities and Exchange Commission (SEC) resulted in violations of securities laws and potential legal liabilities.