Virtual currency ICOs likely a huge racket, warns Wolf of Wall St
23 Oct 2017
Beware of initial coin offerings (ICOs) – they are one of the biggest scams ever, says one of the biggest scammers ever – and a hustler should know a hustle.
For those who have considered sinking money into an ICO - a complicated, barely regulated, and booming new form of financial vehicle where startups offer investors stakes in ''new'' cryptocurrencies rather than traditional stock - it might be a good idea to listen to Jordan Belfort, behind the 1990s-era Stratton Oakmont pump-and-dump scheme that authorities estimated milked investors of at least $200 million.
Belfort, made famous in the Hollywood movie The Wolf of Wall Street, told the Financial Times in a recent interview that people should have been a bit more cautious before pumping sketchy ICOs full of billions of dollars throughout 2017.
The convicted scammer who once allegedly parked a helicopter on his lawn while stoned out of his mind has now turned into an author.
''Promoters [of ICOs] are perpetuating a massive scam of the highest order on everyone. Probably 85 per cent of people out there don't have bad intentions, but the problem is, if five or 10 per cent are trying to scam you, it's a f**king disaster,'' he wrote in the Financial Times.
Comparing the situation to ''tulip bulbs''-referring to the famous period of Dutch history in which tulip prices shot sky-high and then crashed to near nothing-Belfort added, ''It is the biggest scam ever, such a huge gigantic scam that's going to blow up in so many people's faces. It's far worse than anything I was ever doing.''
The Securities and Exchange Commission has been warning for months that ICOs could easily function as thinly veiled fronts for scammers promising huge returns on fraudulent, crypto-backed investments. In September, the SEC charged one ICO operator, Maksim Zaslavskiy, with fraud in relation to a real estate firm and diamond club which had no real operations. It's possible the agency is mulling a larger crackdown predicated on violations of securities laws.
None of that is even considering that cryptocurrency markets are notoriously chaotic and volatile, and even your legitimate investment could collapse overnight, the Financial Times points out.
Bitcoinist points out that the whole cryptocurrency space has had an exceptional growth rate this year. The total cryptocurrency market capitalization recently reached its all-time high of $172 billion, which is pretty impressive since the last year the market cap was only worth $12 billion.
Many experts and analysts have various theories as to why the cryptocurrency market experienced this exceptional growth. Most attribute the growth to a broader global acceptance of cryptocurrencies by many financial institutions. A small minority, however, believes that the rapid growth was caused by the massive hype surrounding ICOs. In the last couple of months, ICOs have become widely popular worldwide because of their very high returns for the early investors.
But smart investors will heed the words of someone who can be expected to know a racket when he sees one.
