The Wondrous World of Cryptos Fraud: Profitable and Growing

This is a syndicated repost courtesy of True Economics. To view original, click here. Reposted with permission.

One of the key promises of cryptocurrencies to their ‘users’/’investors’/’gamblers’ has been that of security of data stored on cryptos-backed blockchains and crypto ‘assets’ held by their owners. Yet, scandal after scandal, the myth has been deflated by the news flows, with security breaches, theft and fraud hitting the cryptos markets with frequency and impact not seen in traditional investment venues and asset classes.

Research by the Anti-Phishing Working Group released on Thursday shows that criminal activities have resulted in a theft of some $1.2 billion in cryptocurrencies since the beginning of 2017  (https://www.reuters.com/article/us-crypto-currency-crime/about-1-2-billion-in-cryptocurrency-stolen-since-2017-cybercrime-group-idUSKCN1IP2LU). Which is a significant number, but most likely an under-estimate to the true extent of theft and excludes fraud, especially fraud relating to the notorious ICOs.

In January-April 2018, ICOs raised some $6.6 billion, marking a 65% increase on 4Q 2017 ($3.9 billion in ICOs funding). Based on WSJ report that surveyed 1,450 ICOs, roughly 20 percent of the new offers raise major red flags for scams, including “plagiarized investor documents, promises of guaranteed returns and missing or fake executive teams”. Again, this is just a part of an iceberg. About half of all ICOs projects had no actual service or product offer behind them. In other words, investors in more than half of all ICOs were backing nothing more than a technological white paper, absent even a rudimentary business plan.

While there have been a lot of discussion in recent months about the potential Ponzi-game nature of the cryptos markets, irrespective of where you stand on the issue, there are two questions every investor must ask before dipping into the cryptos waters:

  1. Do I, as an investor, really comprehend the risks, uncertainties, complexities, and ambiguities imbedded in product offers I am considering investing in? and
  2. Do I, as an investor, have meaningful avenues for monitoring, hedging and/or ameliorating the above risks, uncertainties, complexities, and ambiguities imbedded in product offers I am considering investing in?
Now, without any sense of irony, when it comes to cryptos and ICOs, for any, even the most-informed and seasoned investor, the answers to (1) and (2) are ‘No’. Which means that cryptos and ICOs are not a form of investment, but a form of speculative gambling. Nothing wrong with playing some chips at an unregulated casino, of course. Feel free to do so at own risk.

Wall Street Examiner Disclosure:Lee Adler, The Wall Street Examiner reposts third party content with the permission of the publisher. I am a contractor for Money Map Press, publisher of Money Morning, Sure Money, and other information products. I curate posts here on the basis of whether they represent an interesting and logical point of view, that may or may not agree with my own views. Some of the content includes the original publisher's promotional messages. In some cases I receive promotional consideration on a contingent basis, when paid subscriptions result. The opinions expressed in these reposts are not those of the Wall Street Examiner or Lee Adler, unless authored by me, under my byline. No endorsement of third party content is either expressed or implied by posting the content. Do your own due diligence when considering the offerings of information providers.

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