On April 18, 2018, a German startup company named Savedroid appeared to pull an ICO “exit scam” when they suddenly posted images on their website suggesting they had taken all of the money contributed so far and disappeared with it.
It turns out, however, that this was merely a publicity stunt to shine a light on how easy it is to scam people with ICOs. Although one may question the effectiveness (and sincerity) of this particular stunt, there is no question that there is a lot of fraudulent activity in the space (one example being that ICObench “experts” were able to retroactively change the previously stellar ratings they had given to Savedroid).
Although nobody likes a “scam,” how exactly should that term be defined in a space that is known for being something of a playground for con artists and scammers (not to be confused with the State of Florida, which also has the same designation)?
According to Brian Kean, Chief Business Development Officer at ICORating (which is one of the few ICO rating sites we’ve found that appears to be unwilling to prostitute1 itself):
We define a project as a scam only when it is proven that the money collected during a pre-ICO or ICO was stolen and the team has disappeared. This means the fraud was preplanned and the theft of investor funds deliberate.
Although intent to defraud may make sense from a criminal law standpoint, we believe that such a strict interpretation ignores far too many other ICOs that are just as likely to result in massive losses to their token holders. Furthermore, since these “lesser scams” don’t necessarily involve criminal liability, there may be no legal recourse available to token holders who are suckered into contributing, so the overall potential loss may even be greater.
We therefore propose that in addition to those projects that meet Brian Kean’s criteria, “ICO scams” should also include:
- projects where the founding team intends to distribute tokens in accordance with the terms of the token sale agreement but not to use any of the proceeds from the sale to seriously develop the project (which would include Centra and BitConnect); and
- projects where the only honest answer to the question “Why blockchain?” is “Because that’s the only way we can raise fucktons of money via an ICO.”
Unfortunately we believe the majority of ICOs today fall into this last category, which is one of the reasons we created Tokenicide. As we continue to review and highlight the bad actors in this space, we hope to educate prospective contributors on how to identify these sorts of scams themselves.
And curse a lot. Have we mentioned how much we fucking love doing that shit?
1Although ICORating charges $10,000 to be reviewed on their site, we do not consider this to be “prostitution” for purposes of this article. That’s because ICORating does not guarantee a good review for $10,000, and most people wouldn’t agree to pay a prostitute $10,000 if there was no guarantee that they were going to get serviced properly. To be honest, we’re not quite sure why anyone would actually agree to pay ICORating $10,000 for a possible shitty review (which is why we write shitty reviews for free), but that’s beside the point. We guess.