Fraud | Blockchain and Cryptocurrency Course: What You Need to Know | 2019 | Summary and Q&A

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July 25, 2022
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Stanford Online
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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.

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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.

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