“The blockchain is one of the most misunderstood technologies in recent times” (MAS), 2019). 11
In the previous issue, the first part of this two-part article covers an introduction to the world of the blockchain and cryptocurrencies technologies (BCT) as well as the positive aspects of the BCT. The second part of this cover the bad and ugly sides of the BCT—the money grabbers, ICO exit scams, as well as some very shady ICO projects.
3.1 Negative Shade: Money Grabbers
Due to the relative ease of creating an ICO campaign, coupled with the fact unlike equity investments into private company each investment quantum is tens to hundred of thousands of dollars, token buyers of ICO can participant with just tens to hundreds of dollars. There exist an auto ICO website generator 4 which allows anyone to generate any ICO campaign with details such as a list of team members and advisors, project roadmap, tokenomics, one pager document and even a white paper which a scammer may modified from (Figure 3.1).
Figure 3.1: Fictitious ICO Website Generator 4
While one may think that it is difficult to fake a list of team members, Artificial Intelligence, specifically machine learning has reached a stage where it is possible to generate many photo realistic individual faces, 3, 5 that resemble our colleagues or friends (Figure 3.2).
Among the thousands of ICO and blockchain projects that are listed in the ICOBench 6 platform, there are several projects which is deemed by the crypto community to be a money grabber projects, meaning that upon collection of the funds, they did not spend as per promises (or lack of) made in their whitepaper. One such project is Lydian 7 which after collecting over USD11 million dollars, chose to abandon their community without providing updates on how their appcoins can be used in their platform. Another of such project is known as Invacio 18 which collected a couple of million dollars. Invacio is an interesting ICO company where on the surface, many non tech individuals who read its whitepaper would likely be enchanted with it due to the choice of words and graphics within. However, beneath its slick whitepaper lies much unsubstantiated claims and true enough within less than one year of its ICO completion, there is not a single multi-agent system related product that is released by the company and what was worse is that the company was found to have stolen open source code and claimed it to be its own. Naturally, many of Lydian and Invacio token purchasers were disappointed and are left with little recourse.
Figure 3.2: AI generated faces 3
3.2 Negative Shade: ICO Exit Scams
Just like in any online related ventures, there are always unscrupulous individuals where their objective is to commit fraud and stealing from others. While many of the blockchain and ICO projects are legitimate, there exist a significant number of ICO exit scams and this is considered one of the ugliest aspects of the ICO space. There are numerous statistics in relation to the ICO exit scams and one estimate it to be as high as 81 per cent. 8, 9, 10 In an ICO exit scam, dishonest individual(s) would create a legitimate looking ICO projects luring token buyers to participate in their ICO and upon completion of the fund-raising campaign, they would delete their tracks and disappears into the cyber space. Figure 3.3 shows some of the more well known ICO exit scams: Giza, Bitconnect, Denaro, and Centra. 11, 12
Figure 3.3: ICO Exit Scams
One mitigating factor to minimise the risk in the participation of ICO exit scams is to evaluate ICO reviews and ratings done by the ICOBench experts. 6 There exist over three hundred ICOBench experts who are all volunteers from the crypto community and many of them are actively contributing to the crypto community by doing deep analysis of various ICO projects that are listed within the ICOBench platform. There over 5000 ICO and blockchain projects that are listed within the ICOBench platform, while it is not almost to identify every shady but it is very encouraging that the crypto community at large (outside ICOBench platform) are also as active in the identify of shady ICO projects. 13, 14, 9
Figure 3.4: Crypto/ICO Scammer Hall of Shame
There exists a crowd-resource platform 2 compilating various ICO exit scams and various modus operandi used by crypto scammers around the world. In addition, various Telegram support groups for the scam’s survivors are also archive within the same platform so that they might be able to provide support to each other, including taking collective actions against the dishonest ICO companies.
Internet E-commerce first emerged in the mid-nineties, 15 and over the next many years, while there are clear benefits offered by E-commerce platform to its customers, there exist also numerous scams as well. 16 It is therefore not surprising that there existing a number of crypto-related scams as well and many of which are ICO related.
Just like there are multiple phases in the E-commerce space, we are currently still in the early phase of the crypto related activities and for every crypto scam that is exposed, the community at large learns to be a bit savvier and more aware of its pitfalls.
On the blockchain side, the future is very bright as there is more innovation to be expected as seen in the steady increase in the number of global patent applications 17 as shown in Figure 4.1.
Figure 4.1: Monthly number of new blockchain patents (Jan 2012–Dec 2018)
1 MAS, (2019), "Is the Block Chain a Solution Looking for a Problem?", Keynote Speech, Monetary Authority of Singapore. Retrieved April 15, 2019 from https://www.mas.gov.sg/news/speeches/2019/is-the-block-chain-a-solution-looking-for-a-problem
2 Yeap R, (2018c), “Crypto/ICO Hall of Shame”. Retrieved April 28, 2019 from https://padlet.com/dryeap/icoScammers
3 Yeap R, (2019), “Over 40,000 (~12 hours) AI generated faces—from ThisPersonDoesNotExist.com”. Retrieved April 28, 2019 from https://youtu.be/pr0N3YWGFQ8
4 Yeap R, (2019b), “Over 14,000 Fake ICO Templates, generated from yetanotherico.com”, Retrieved April 28, 2019 from https://youtu.be/ULvPtHM66Yw
5 Karras T, Laine S, Aila T, (2018), "A Style-Based Generator Architecture for Generative Adversarial Networks", Conference on Computer Vision and Pattern Recognition.
6 ICOBench, (2019c), "ICOBench Experts", ICOBench Platform. Retrieved April 28, 2019 from https://icobench.com/experts
7 Lydian, (2018), "Lydian ICO Project". Retrieved April 25, 2019 from https://icobench.com/ico/lydian/ratings
8 Catalini C, Gans J, (2018), "Initial Coin Offerings and the Value of Crypto Tokens", MIT Sloan Research Paper No. 5347-18; Rotman School of Management Working Paper No. 3137213.
9 Morris D, (2018), "Nearly Half of 2017’s Cryptocurrency 'ICO' Projects Have Already Died", Fortune ShitCoinOffering, (2018), "ShitCoinOffering Experts". Retrieved April 28, 2019 from
10 Dowlat, S., Hodapp, S. (2018), "ICQ Quality: Development & Trading", Satis Group LLC Publication. Research”, The Use of Publication and Patent Statistics in Studies of S&T Systems”, 277-298.
11 DeadCoins, (2017), "Deadcoins Website", Retrieved April 28, 2019 from https://deadcoins.com
12 Dapped, (2018), "Dapped compilation of ICO Exit Scams" Retrieved April 28, 2019 from https://dapped.io/post/7676/Scam_ICOs
13 Concourseq, (2018), "Concourseq Website", Retrieved April 28, 2019 from https://concourseq.io
14 ICOCheck, (2018), "ICO Check", Telegram Group, Retrieved April 28, 2019 from https://t.me/checkico
15 Baiden, J (2011), "Cyber Crimes", SSRN Electronic Journal.
16 Stone B, (2013), "The Everything Store: Jeff Bezos and the Age of Amazon", Bantam Press, ASIN Number B019TLO7C2.
17 Orbit, (1998b), "Blockchain related Patent Map: Publication by Month", Retrieved January 5, 2019 from https://orbit.com
18 Invacio, (2018), "Invacio ICO Project", Retrieved September 10, 2018 from https://icobench.com/ico/invacio/ratings; Cache available (as at 27 April 2019): https://archive.fo/X6yJa
Dr Rex Yeap is Vice Chairman of Business Angel Network (BANSEA), co-founder of BANSEA Fund One and Chair of the Investment Committee Board, of this angel investment fund. He is also the Head of Education at the Singapore Cryptocurrency and Blockchain Industry Association and is an ICO Innovation Advisor for several projects that are in various stages.
Dr Yeap has 30 years of experience across the Information Technology (IT) value chain that spans industry, government and academia. He is the co-inventor of the patented IP Blockchain technology and has over 20 IT related patents and thousands of inventions over the past 30 years.
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