Wikipedia’s Jimmy Wales Issues Stern Warning on ICOs
Wikipedia founder Jimmy Wells is warning investors to tread carefully around initial coin offerings (ICOs), the new crowdfunding model that has taken the startup community by storm.
Many ICOs are “Absolute Scams”
Wales recently told legacy media giant CNBC that many ICOs are “absolute scams,”
“There are a lot of these initial coin offerings which are in my opinion are absolute scams and people should be very wary of things that are going on in that area,” he said.
Although the author is much more optimistic about ICOs, Wales may have a point. Hacked.com’s Jonas Borchgrevink was recently informed that ToTheMoon professional mining company has been scamming investors out of tens of thousands of dollars. The so-called TMT managed to lure investors by stealing content from Giga Watt, a Washington-based mining service.
Hacked.com has currently analyzed 89 ICOs. The full breakdown, including links and corresponding scores, can be found here.
The Securities and Exchange (SEC) Commission has also issued a stern warning against ICOs, citing the potential risk of fraud.
Does Your Business Really Need a Token?
The success of an ICO naturally boils down to the perceived utility of the token being issued. Will the business model really benefit from cryptocurrency, and can you quantify that benefit? Startups need to answer this question as honestly as possible. Investors must carefully weigh the benefits and costs of investing in any startup enterprise, ICO or otherwise.
But that’s not to say most ICOs are “scams.” They may not be investment-grade, but that shouldn’t bring the integrity of the owners into consideration.
Governments are certainly cognizant of the risks. China and South Korea have banned ICOs altogether. Singapore recently announced it is monitoring ICOs and the cryptocurrency market more generally. Singapore’s Deputy Prime Minister Tharman Shanmugaratnam recently confirmed that cryptocurrency is not considered “legal tender” in the country.
«Featured image from Shutterstock.»