New Study: 20% of ICOs Are Scams, But Investors Aren’t Fazed

Initial Coin Offerings (ICOs) have become the hottest way of raising capital, but at least one in five has turned out to be a scam, according to a new study. 1 in 5 ICO Projects are Scams The number of Initial Coin Offerings (ICOs) has gone through the roof throughout the last year as their underpinned technology, the blockchain, received mass media exposure and starts to see widespread adoption. Yet, being comparatively easy means of

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Switzerland First in Ranking of Top 10 Most Blockchain-Friendly Countries in Europe

BlockShow’s rankings of the best European countries for opening a blockchain company puts Switzerland at the top of the list.

Switzerland is ranked number one in a list of the top ten European countries for starting a blockchain company, according to a study released by blockchain conference BlockShow Europe 2018.

In the list of best countries for starting a blockchain company, Gibraltar and Malta follow Switzerland in second and third respectively. The study consisted of 48 European countries that were examined for rankings by Initial Coin Offering (ICO) regulations, regulations on crypto as a payment service, and taxation frameworks for crypto.

Switzerland is known as a crypto-friendly nation due to both its establishment of a virtual currency hub, “crypto valley,” in Zug and its status as a tax-free haven for crypto investors. Gibraltar has reportedly attracted 200 ICOs before the planned launch of its Gibraltar Blockchain Exchange (GBX), and Malta, the “blockchain island,” has welcomed major crypto exchanges Binance and OKEx recently.

BlockShow also released a poll this week on blockchain-based app Polys that allows users to vote on the leading women and companies in the EU blockchain space. The winners of the poll will be announced during the BlockShow conference at the end of this month in Berlin.

At the beginning of February, the European Commission announced the launch of the EU Blockchain Observatory and Forum as part of their aim to unite the economy around blockchain. However, more recently, newly approved EU privacy laws – which come into effect on May 25 – arguably conflict with the decentralized nature of blockchain technology.

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US Securities and Exchange Commission Launches ‘HoweyCoins’ ICO

In a surprising turn of events, the US Securities and Exchange Commission has launched its own initial coin offering dubbed HoweyCoins. ‘A Hot Investment Opportunity’ Anyone looking for a hot new initial coin offering (ICO) should look no further than the US Securities and Exchange Commission’s brand new token sale for HoweyCoins. States the regulatory authority in an official press release: If you’ve ever been tempted to buy into a hot investment opportunity linked with

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Chinese ASIC Manufacturer To Turn To AI In Case Of Stricter Gov’t Regulation

Bitmain is looking to artificial intelligence as the natural option to turn to in case of an increase in China’s already stringent crypto regulations.

Due to the recent crypto crackdown in China, Chinese ASIC chip manufacturer Bitmain is turning to artificial intelligence (AI) as an alternate revenue source, Bloomberg reports today, May 17.

China’s crypto regulations have included an initial coin offering (ICO) ban in the fall of last year, this January’s ban on “exchange-like services,” and the February ban on foreign crypto exchanges.

Bitmain manufactures the processing chips and miners that mine for a variety of cryptocurrencies, including Bitcoin (BTC), Ethereum (ETH), and altcoin Monero; although the release of the Monero-mining Antminer at the end of March led Monero to upgrade in order to preserve its ASIC-resistant nature.

Jihan Wu, Bitmain’s co-chief executive, told Bloomberg in one of his infrequent interviews that because “artificial intelligence requires lots of computations,” it is the natural alternative option for the ASIC manufacturer:

“As a China company, we have to be prepared.”

Bitmain’s Sophon BM1680 chip, which they began selling in October, can more cheaply speed up machine learning as compared to those made by Nvidia and Advanced Micro Devices Inc, although it is not as powerful.

Wu — who predicts that AI chips could account for up to 40 percent of Bitmain’s revenue in five years — told Bloomberg that Bitmain is “just trying to do something that they cannot take care of well enough.”

At the end of February this year, a report showed that Bitmain, a four-year-old company, made between $3 and $4 bln in operating profits in 2017, as compared to twenty-seven-year-old competitor Nvidia, who made about $3 bln during the same period.

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Wall Street Journal Research Finds ‘Red Flags’ In 19% Of ICOs

271 out of 1450 ICOs found by the Wall Street Journal use “deceptive or even fraudulent tactics,” it says.

The Wall Street Journal released findings from its analysis of almost 1500 initial coin offerings (ICOs) May 17, concluding 18.6% of them raised “red flags.”

The latest source to investigate the still-booming ICO market, the WSJ warned that of the 1450 offerings it found, 271 of them were using what it described as “deceptive or even fraudulent tactics.”

Those tactics ranged from hiding or providing fake information about the issuing company’s location and leadership to secrecy about finances and even plagiarized whitepapers.

Of the 271 suspicious actors, some have already shut down, with lawsuits and regulators resulting in investors attempting to recoup an estimated $273 mln in lost funds.

Authorities continue to grapple with the rate of expansion of ICOs throughout the world in 2018, with the US Securities and Exchange Commission (SEC) resolving to closely monitor the domestic arena for bad actors.

The fundraising tool further divides opinion both inside and outside the cryptocurrency industry.

Cointelegraph today reported on how UK platform CoinShares’ CEO Danny Masters said improvements to the ICO arena were an essential step in allowing Bitcoin markets to grow.

Earlier this month meanwhile, Zhao Changpeng, CEO of the world’s largest cryptocurrency exchange Binance, released a dedicated blog post praising ICOs, investing in which he described as “100 times easier than through traditional VCs.”

“Scams exist everywhere, in every industry,” he wrote on the topic of illegal offerings.

“I still receive phone calls and SMS telling me I won a grand prize, but I need to make a bank transfer to someone first. Does that mean we should stop using phones, SMS, and banks?”

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SEC Launches Mock ICO to Show Investors Warning Signs of Fraud

The SEC Office of Investor Education and Advocacy launched a fake ICO website to illustrate common warning signs of a scam.

Office of Investor Education and Advocacy at the US Securities and Exchange Commission (SEC) has launched a fake initial coin offering (ICO) website,  according to a press release May 16. The goal of the site is to increase awareness of the typical warning signs of scam ICOs and to promote investor education.

The mock website represents a classic example of a fraud ICO website that touts an “all too good to be true investment opportunity.” The website includes such details as a misleading and blurry white paper, guaranteed returns claims, celebrity endorsements, and a countdown clock that is “quickly running out on the deal of a lifetime.”

When a user clicks on “Buy Coins Now,” they are lead to the website, which was established by the SEC to help investors avoid fraud. The site warns that if users would have responded to an investment offer like HoweyCoins, they “could have been scammed.”


SEC Chairman Jay Clayton emphasized that the agency supports the adoption of new technologies, but it also encourages investors to educate themselves and understand what fraudulent offers look like:

“We embrace new technologies, but we also want investors to see what fraud looks like, so we built this educational site with many of the classic warning signs of fraud. Distributed ledger technology can add efficiency to the capital raising process, but promoters and issuers need to make sure they follow the securities laws. I encourage investors to do their diligence and ask questions.”

Owen Donley, Chief Counsel of the SEC’s Office of Investor Education and Advocacy, noted that a fraudulent ICO website can be set up in a very little time, which illustrates how easy and fast it can be to launch another scam offer. “Fraudsters can quickly build an attractive website and load it up with convoluted jargon to lure investors into phony deals,” Donley said.

Earlier this week, Cointelegraph reported that three co-founders of cryptocurrency startup Centra Tech have been formally indicted for running a fraudulent ICO. Centra Tech’s ICO raised $32 mln from investors in 2017. The Florida-based founders misled investors by claiming that they had partnered with Visa and Mastercard to issue virtual currency debit cards.

Late last month, SEC Commissioner Robert Jackson expressed criticism of ICOs in general, claiming that investors “are having a hard time telling the difference between investments and fraud.” He further stated that the ICO market is a prime example of what an unregulated securities market would look like.

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Russia’s Digital Economy Bill Supported by State Duma Committee in Move Towards Crypto Regulation

The State Duma’s Committee for Legislative Work will support a digital economy initiative that will “minimize” the risks of citizens using digital assets.

Russian State Duma’s Committee for Legislative Work will support the first reading of an initiative that will add the basic norms of digital economy to the Russian Federation Civil Code.  This is the latest step on the road to regulating cryptocurrency in the country, local news outlet Izvestia reports Wednesday, May 16.

Pavel Krasheninnikov of political party United Russia and head of the Legislative Work committee, told Izvestia that the initiative aims to “minimize the existing risks of using digital objects for transferring assets into an unregulated digital environment for legalization of criminal incomes, bankruptcy fraud or for sponsoring terrorist groups.”

The initiative, which is scheduled to be considered next week, does not mean that digital currencies will now become a legitimate means of payment. Instead, a separate law developed by the Central Bank, the Ministry of Finance, and the Ministry of Economic Development will set conditions for digital currencies to be used as payment “in controlled quantities.” The initiative does assert that digital confirmation by a user in a smart contract is equal to his written consent.

Russia first prepared a bill “On Digital Financial Assets” in March of this year, which would provide federal laws governing cryptocurrencies and Initial Coin Offerings (ICO) inspired by President Vladimir Putin’s decision to begin crypto regulation on July 1.

The March 20 draft defines crypto and digital tokens are assets only to be traded on authorized exchanges, also requiring user account at crypto exchanges to comply with AML and counter terrorism financing regulations. A review draft of the bill from mid-April added that the exchange of crypto for fiat above around $9,600 will be subject to mandatory currency exchange regulation.

Igor Sudets, the director of the program “Blockchain for Lawyers” at the Plekhanov Russian University of Economics in Moscow, told Izvestia that “it is important that the crypto currency and tokens are included in the legal field of the Russian Federation”:

“On the one hand, these are opportunities that we have no right to miss. On the other hand, while they are outside the legal field, they can be used to give bribes, withdraw money in the case of bankruptcy, pay ‘black salaries, and simply get stolen – with no repercussions [for criminals].”

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US Prosecutors Indict Three Co-Founders Of Floyd Mayweather-Backed ICO For Fraud

A US District Court in Manhattan has issued a formal indictment of the three founders of Floyd Mayweather-backed Centra Tech ICO for securities fraud, among other charges.

The three co-founders of cryptocurrency startup Centra Tech have been formally indicted for running fraudulent ICO, according to a statement May 14 from the U.S. Department of Justice.

According to the four-count indictment issued by the U.S. District Court in Manhattan, all three Centra Tech co-founders Sohrab Sharma, Robert Farkas, and Raymond Trapani are being charged with securities fraud, wire fraud and two conspiracy counts.

Centra Tech’s Initial Coin Offering (ICO) raised $32 mln from investors in 2017. The Florida-based defendants had misled investors by falsely claiming that their company had partnered with Visa  MasterCard to issue virtual currency debit cards.

Centra Tech was previously promoted by celebrities Floyd Mayweather and DJ Khaled.

Late last month, US Securities and Exchange Commission (SEC) Commissioner Robert Jackson expressed criticism of ICOs in general, claiming that investors “are having a hard time telling the difference between investments and fraud.”

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Two Ex-JPMorgan Blockchain Leaders Reveal New Decentralized App Store Startup

Two former JPMorgan blockchain executives have announced their own blockchain-based startup, currently in the process of fundraising.

The Two former leads of JPMorgan’s blockchain program unveiled a new startup, a decentralized app (DApp) store, Fortune reported yesterday, May 14.  

Amber Baldet and Patrick Mylund Nielsen, both of whom held lead positions at JP Morgan’s blockchain platform Quorum, have announced the release of a new startup, Clovyr, where users can browse decentralized apps, developer programs, and distributed ledgers. Clovyr will be compatible with Quorum as well as Ethereum software clients Parity and Geth, with plans to add more in the future.

Baldet left JPMorgan in the beginning of April, with as-of-then unannounced plans to start her own company. She tells Fortune that the state of blockchain currently can be compared to the beginning of the use of public clouds – at first businesses built their own, only later changing to public clouds as security improved: “the conversation on the enterprise side right now feels a little bit like that.”

Clovyr is currently in the fundraising stage, but will not be holding an Initial Coin Offering (ICO) – Sorry, there’s no ICO,” says Baldet, but adding that Clovyr will help companies convert fiat into crypto if needed.

A multitude of Wall Street executives have recently been leaving their traditional financial jobs for the blockchain and crypto sphere. One former Goldman Sachs exec joined crypto wallet in mid-April, while another reportedly left to join Mike Novogratz’s digital merchant crypto bank as COO.

Yesterday, May 14, Cointelegraph reported that the CFO of Australia’s Commonwealth Bank left the bank to become COO of blockchain software firm

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Despite Ongoing Probes, ICO Legalization in the Cards in South Korea

South Korean regulators are investigating a number of exchanges in the country while lawmakers are working on legislation to legalize initial coin offerings.

South Korea has long been a big player in the cryptocurrency world, but recent government crackdowns have stymied the growth of local blockchain-based firms.

Despite probes into exchanges as recent as last week, there are concerted efforts to re-legalize initial coin offerings in the country. South Korean lawmakers are working on legislation that aims to lift existing bans on ICOs.

According to The Korea Times, a group of lawmakers is hoping to overturn the government’s ban on local ICOs that was enforced in September 2017.

Helping legitimate ICOs get on their feet

The cryptocurrency boom in the last two years has led to the launch of numerous ICOs around the world. Some have been revolutionary while others have been outright scams. As a result, it is becoming necessary for government and regulatory bodies to ensure firms developing blockchain-based solutions and products are operating in good faith.

A number of scams worldwide have left a bad afterglow, so any move to legalize ICOs needs to be done with care. Leading the charge is Hong Eui-rak, a member of the ruling Democratic Party of Korea. Addressing a forum on blockchain and ICOs at the National Assembly on May 2, Hong expressed hope that the bill would garner support and be passed this year:

“The primary goal (of the legislation) is helping remove uncertainties facing blockchain-related businesses.”

The bill will foster ICOs launched by public organizations and research centers that are developing legitimate products to further the evolution of blockchain. These ICOs will be closely scrutinized by the Korean Financial Services Commission and the Ministry of Science and ICT.

National Assembly speaker Chung Sye-kyun stressed the importance of the bill and its potential to alleviate political uncertainty that has hindered the adoption of blockchain technology and cryptocurrencies in the country:

“Blockchain and cryptos can be used in various public sectors for good causes. Given their potential, we need to work to help reduce political uncertainties they face.”

Financial regulator warming up as well

While lawmakers push for their bill to be cleared by the National Assembly, the South Korean Financial Supervisory Service is reportedly set to ease up on cryptocurrency regulations.

Recently appointed FSS governor Yoon Suk-heun was quoted by The Korea Times saying there were “some positive aspects” to cryptocurrencies. While he was reluctant to divulge regulatory details pertaining to cryptocurrency exchanges operating in the country, Yoon suggested that things were slowly being ironed out:

“There are a lot of issues that need to be addressed and reviewed. We can figure them out, but gradually.”

Regulations have a role to play

In an interview with Forbes in April, the CEO of South Korean exchange Coinone Cha Myunghun explained the need for government guidelines and regulations in the industry. Having founded the exchange from the ground up, Cha has seen his company grow along with the popularity of cryptocurrencies, which came to a head in 2017.

As the Kimchi premium had traders in a frenzy, government regulators were forced to take a stance on the industry. That led to calls for trading bans which were later rebuked, while the banks servicing Coinone and other exchanges faced inspection by government officials.

While there was talk of an all-out ban against cryptocurrency exchanges, it never came to fruition. Cha told Forbes that would have been a foolish decision:

“It’s inevitable for the government to be concerned with cryptocurrency. But extreme measures such as the shutdown of exchanges would be going too far against the global trends.”

However, Cha believes regulations should focus on illicit activities within the market. In the past, his exchange noticed suspicious activities but had no avenue to report concerns.

The Coinone owner and other influential cryptocurrency figures in the country have been actively working with government officials to educate and inform them of the benefits of blockchain technology.

Furthermore, in-country exchanges have worked to meet new national requirements — namely KYC procedures for traders, which effectively ruled out anonymous cryptocurrency trading.

A Bithumb official painted a less positive picture, explaining that the expected market reaction didn’t occur since banks weren’t actively inviting new traders to register as per the new government mandate:

“Markets expected the introduction of the real-name registration system would have been helpful to revive trading, but these efforts failed as local banks were reluctant to invite more crypto traders.”

That hasn’t stopped the likes of Bithumb from pushing for further adoption of cryptocurrencies.

The exchange operator has been actively deploying ATMs and kiosks that accept cryptocurrency at fast food companies and malls around the country. This follows in the footsteps of Coinplug, which had previously set up Bitcoin ATMs at two locations in Seoul, according to Huffpost Korea.

One of them was at popular cafe Sedona, based in the city’s biggest mall. The presence of the  ATM at the cafe led to crypto enthusiasts frequenting the location, which led to Bitcoin meetings and conferences being hosted at the cafe. This was back in 2014 when Bitcoin was still relatively unknown by mainstream society; Coinplug has since stopped creating and operating these ATMs.

Given the surge in popularity of trading in South Korea, Bithumb is breathing new life into the cryptoATM industry.

Move to foster blockchain development in South Korea

As Cointelegraph reported in March, the South Korean government will likely move swiftly to provide regulations that will foster the growth of blockchain technology while protecting consumers from ICO scams and fraud.

Talk of South Korean internet conglomerate Kakao’s plans to launch an ICO outside of the country may have forced the hand of in-country regulators. A positive stance towards cryptocurrencies and ICOs could encourage large firms to continue their projects inside the country.

Given the voracious appetite for cryptocurrency trading in South Korea, the government seems to be taking baby steps towards a stance that will benefit all parties involved.

Much like U.S. regulators are working towards positive regulatory measures, South Korea’s government and financial regulators seem to be warming to the idea of a healthy blockchain sector in the country.

Further statements from these various players will confirm this stance, but at this stage the outlook is now far more positive than it had been in the early months of 2018.

Regulators still probing

With that being said, the FSC is still keeping close tabs on local cryptocurrency exchanges, which have been subject to probes over the past week.

Local news outlet Chosun reported that UPbit, the country’s fourth largest exchange by 24 hour trade volume, is being investigated for alleged fraud. The FSC is looking into the bank accounts of a number of exchanges, including Bithumb, to investigate allegations of money laundering and fraud through cryptocurrency exchanges.

Chosun quoted an FSC official who laid out some of the allegations against UPbit:

“The FSC is collaborating with authorities in other countries. Our latest findings show that the domestic exchange faked its balance sheets and deceived investors. The FSC is checking UPbit’s computer system with prosecutors and the FSS to audit the exchange’s virtual currency holdings.”

The latest move comes at a juncture where there are calls for greater collaboration between regulatory bodies around the world. Nevertheless, FSC Vice Chairman Kim Yong-beom says regulators still see massive potential in cryptocurrencies, as reported by The Korea Times:

“Regarding the unique nature of cryptocurrencies, each country has its own assessment. That means an international discussion and cooperation among regulators to come up with policies on crypto-assets is necessary. We are seeing a steady development of blockchain technology thanks to its greater accessibility and efficiency. Because this technology has the potential to shake up today’s regulations on securities, regulators have to respond to such a looming challenge.”

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