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The US financial regulator has changed cryptocurrency company PlexCorps and its owners with defrauding investors during the company’s initial coin offering (ICO). Charges were filed against the company for marketing and selling PlexCoin, their cryptocurrency, as an asset that would net a return of 1354% within 29 days.
Why It’s Important:
ICOs have been accused of providing investors with valueless tokens and offering meaningless value propositions. The novel fundraising tool offers investors digital tokens in exchange for funds used to develop their proposed software. PlexCoin’s website, while rather flashy, is vague about what it hopes to construct; something the SEC has picked up on.
This is the first time the SEC’s Cyber Unit has filed charges since its creation in September. However, earlier this year two companies, who also raised funds through an ICO, were charged with fraud for selling tokens supposedly backed by real estate and diamond investments. The move signals a government commitment to dealing with fraudulent ICOs.
What to Look Out for:
The first ICO was held in July 2013, but the trend really took off in early 2017. Almost $2.3bn has been raised in this way. The worry is that many ICOs provide investors with little real value.
Fiverr, the global online marketplace for tasks has several users willing to write “professional blockchain ICO white papers”, from as little as a £74.52. Those looking to invest in an ICO should tread carefully. (The Market Mogul)
