Investors beware — wading into the ICO waters is a dangerous spel
By Dana Blankenhorn, InvestorPlace Contributor
Ter the Broadway succesnummer (and speelfilm) The Cocoanuts, about the 1920s Florida land boom, Groucho Marx describes the many housing types available ter his own scam land overeenkomst.
&ldquo,You can even get stucco,&rdquo, he jokes. &ldquo,Boy, can you get stuck-o.&rdquo,
A lotsbestemming of investors are getting stuck-o today ter Initial Coin Offerings (ICOs), public offerings of fresh company shares te exchange for cryptocurrency, usually Ethereum (ETH).
Unlike Initial Public Offerings (IPOs), ICOs are totally unregulated. Spil with Bitcoin, they&rsquo,re global. They&rsquo,re governed by contracts and goodwill, both difficult to assure. But they have bot so successful they&rsquo,re luring a lotsbestemming of people who should know better into the spel.
Take Arsenal Football Club. They just signed a overeenkomst to promote CashBet, a coin designed for sports betting.
Sounds Crazy? You Bet
CashBet is a U.S. company. Sports betting is illegal te most of the U.S., albeit it&rsquo,s flawlessly legal te the UK. Arsenal will promote the ICO at its Stadium and suggest the pics of its players ter CashBet ads. Alexis Sanchez got out just te time.
Even spil the prices of cryptocurrency have turned down te 2018, the ICO market has continued to fever up, raising $450 million just this month.
The largest of thesis ICOs has bot for Envion, which has raised about $100 million ter order to create a mobile mining device that lets cryptominers exploit &ldquo,green energy.&rdquo,
The CEO is a renewable energy investor named Mattias Woestmann. Everyone else is green spil ter they toevluchthaven&rsquo,t bot here before. ICO Crunch, which analyzes ICO projects, reviewed them recently and found lots of unanswered questions, the kleuter that would drown most companies seeking a public listing.
But an ICO is not a public listing. That&rsquo,s something anyone considering an ICO investment needs to understand. Thesis investments are not very liquid. It will be hard to get out if things go bad. And the risks are giant.
Boy, Can You Get Stuck-O
Ernst &, Youthful recently analyzed the last three years of ICOs and found that 10% of the coins raised were subsequently stolen by hackers. Their sites are attacked 100 times each month. ICO investors are also frequent subjects of phishing attacks, e-mails asking for private details that are then used to steal assets.
The people selling ICOs may themselves be crooks. A crook may call himself a guru, and a Fresh York company may optie to be from Samenvoeging Vegas. Journals covering cryptocurrency are packed with stories of companies like Benebit, which may have run off with $Two.7 million of investor money.
The Securities and Exchange Commission has launched a &ldquo,cyber&rdquo, unit to go after ICO crooks, filing its very first charges ter December, but they&rsquo,re well behind the bad guys and, spil the market is global their reach is limited anyway.
Even legitimate public companies can get caught te the act. Eastman Kodak Company Common Fresh (NYSE: KODK ) tripled te price early this month after it announced KODAKOne and KODAKCoin, said to be a podium for getting photographers paid for their work.
The announcement brought te about $300 million of fresh public investment to Kodak. This despite the ICO being a re-branding of a previously-failed launch with Kodak receiving precisely zero dollars from the proceeds. The ICO sponsor wasgoed just licensing the name.
The Bottom Line
Spil scammy spil the cryptocoin market may be, the ICO market is even scammier. Success today is measured by sponsors getting their coins. They&rsquo,re not measured by investors getting a terugwedstrijd.