ICO Investors Fall For Exit Scams, Phishing


The founder of crypto startup Savedroid, which just raised $50 million in an initial coin offering (ICO), posted two photos on his Twitter account a few months ago one of him at an airport and another one of him at the beach. The caption? “Thanks guys! Over and out.” While it seems that Savedroid Founder Yassin Hankir pulled off a fake “exit scam,” the real ones are becoming a problem.

News came this week that, according to one analysis, ICO exit scams have taken almost $100 million from investors. (The exact amount that Diar calculated was $96,811,400.) In its report, the firm said that Shenzhen Puyin Blockchain Group took in $60 million through exit scams. ACChain, one of the company’s ICOs, however, disputed this account in a statement. In another case, Diar said that NVO “supposedly exit scammed” after bringing in $8 million from investors.

Why are these purported scams happening? For starters, Diar said, the ICO world is “largely unregulated” and those that start crypto projects aren’t obligated by contracts to finish a project. In fact, the site contends that “after raising millions of dollars with no string attached, the founders’ incentives to actually build a valuable company are very limited.” It may also be the case that the success of a crypto project might not be reflected in the price of a utility token.

At the same time, scammers have netted over $2.3 million over the second quarter from crypto schemes. Investors, for example, are reportedly getting tricked by cybercriminals that use the names of new ICOs and offer the promise of early token access. And “sometimes phishing sites pop up before official project sites,” Kaspersky Lab noted in a report released this week.

When it comes to particular digital currencies, Kaspersky noted that Ethereum (ETH) is often used by scammers during phishing attempts. That rise comes as “more funds are attracted by ICOs on the Ethereum platform.” In fact, Kaspersky arrived at its $2.3 million estimate from data received by ETH wallets that were used by purported bad actors. (However, the company clarified that money taken with traditional phishing attempts was not included in its report.)

Will investors continue to fall for phishing attempts or exit scams in the future, or will stronger safeguards prevent these criminals from taking advantage of unwitting investors? That remains to be seen, but, for now, it appears the world of ICOs is a bit of a Wild West environment  and investment opportunities may not be what they seem.