The price of bitcoin and other cryptocurrencies may have plunged significantly in 2018, but it has done nothing to dampen the rate at which new cryptocurrencies are launched and Initial Coin Offerings or ICOs are issued.
Indeed, there has been a recent proliferation of ICOs. According to the website CoinShedule, ICOs have so far raised more than $11billion in 2018, compared to the $3 billion generated in all of 2017.
No doubt, many new cryptocurrencies are launched by startups looking to cater to a particular niche or solve a specific problem within the blockchain industry. Nevertheless, hundreds of ICOs are nothing but elaborate scams created by fraudsters to defraud the unsuspecting public.
In May, the Securities and Exchange Commission (SEC) tried to warn the public about such fraudulent cryptocurrencies by creating a faux website (howeycoin.com) and issuing a bogus ICO in a format often used by such criminal elements.
“We’ve recently seen fraudsters pretending to be involved in blockchain technology, initial coin offerings and crypto-currencies — when really they are simply operating scams designed to take investors’ hard-earned money.
“We created the bogus HoweyCoins.com site as an educational tool to alert investors to possible fraud involving digital assets like crypto-currencies and coin offerings,” SEC says on the site.
The Commission then goes on to describe a handful of red flags that signal a scam including claims of unbelievably high but guaranteed returns, claims of SEC compliance, accepting payments with a credit card and needless celebrity endorsements.
The website deadcoins.com has listed more than 800 hundred of such dead cryptocurrencies. Most of them held the promise of good tidings for their investors but all of them are now either worthless or trading for less than 1 cent.
The SEC on its part has responded by handing out stringent conditions guiding the issuance of ICOs. In 2017, it formed a Cyber Unit dedicated to bringing charges against companies or individuals launching fraudulent ICOs. The Commission also said it would be looking closely at companies that suddenly pivot to blockchain or cryptocurrencies.