The author of “The Wolf of Wall Street”, Jordan Belfort, warned that initial coin offerings (ICOs) are actually a massive scam. As revealed by The Financial Times, the former Wall Street broker said that cryptocurrency ICOs could be explosive only a month after a watchdog issued a warning on the matter.
Mr. Belfort shared his opinion that ICOs were “the biggest scam ever”, and added that ICO salesman had adopted methods that seemed similar to the strategies used by the so-called boiler rooms.
Initial coin offerings feature special coins or digital tokens which are issued by firms to their investors. ICOs are often aimed at raising additional funding for the companies’ business or a specific project by avoiding interacting with banks or other venture capitalists.
Cryptocurrencies Becoming More Popular
The rising popularity of initial coin offerings has also seen a massive increase in the most popular cryptocurrencies’ value in 2017. Reportedly, the most popular cryptocurrency – Bitcoin – saw its value increase from $998 on January 1st 2017 to $5,913 to date. Other cryptocurrency that has seen its value rise to a record high in 2017 was Ethereum.
As mentioned above, cryptocurrencies have seen a rapid increase in their popularity in 2017, with Ethereum being approved by some reputable companies, such as Microsoft and BP. According to data, the last 10 months have seen over 200 initial coin offerings raise an amount of over $3 billion. In September, ICO funding was officially suspended by the Central Bank of China.
Watchdog Warns about Risks of ICOs Purchase
As mentioned above, a local regulatory watchdog – the Financial Conduct Authority – has recently issued a warning, calling the initial coin offerings high risk investments primarily due to the fact that they were not ensured with protection. Another reason why ICOs were considered risky was the fact that their value is quite dynamic, and what is worse, they could often be associated with frauds or illegal schemes.
Currently, coins are considered an investment in the gambling operators which issue them, but actually, investors could end up fuelling some money into a business they are not well-acquainted with. What is more, the Financial Conduct Authority further warned that in some cases, initial coin offerings actually offered no real value, saying that such investments were very risky and speculative ones, and shared that investors should prepare themselves to see their coins’ or tokens’ value be reduced to zero.
Some supporters of initial coin offerings have argued that ICOs are a legitimate way used for raising money. Companies that feature ICOs also usually promise to give buyers of such coins or tokens access to a certain service as soon as the latter is officially rolled out. Special profits could also be offered as a benefit to ICOs buyers.
