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ICOs may come and go but scammers are forever

The initial coin offering may all but have met its demise, but ICO scammers live on. While authentic projects have tackled all types of challenges, including market strength, producing investing value, putting out an actual product, and following up on promises made – the vapid scam artist is devoid of decency, work ethic, and is not held back by tech limitations.

Rather disturbingly, the scam artist is not much unlike the humble, but nevertheless malicious cockroach. And just like the cockroach, the operating range of the scammer is rather wide, there are very few conditions under which this person cannot function. Even with the pinnacle of ICO and token mania being a thing of the past, scams and scam artists live on. Legal action, regulation, and undesirable press are a few factors that are sure to make scammers disperse. Despite vehement protests of innocence from the people behind them, the following ICOs have all been labeled as scams. 

Karat is sick

Blockchain may be flourishing grounds for the production of fresh ideas, but it is simultaneously a dump for ludicrous concepts and scam artists who conceal their real intent. An idea that has been circulating around the crypto bowl for a while now is that of a gold-backed cryptocurrency. Karatbars are a great example of the gold-backed fad and this has drawn some serious scrutiny as of late. 

During 2018, the German firm initiated Karat Gold Coin (KBC) following an ICO that allegedly raised 100 million US$.  As a follow-up to that fund-raising event, Karatbars are interested in holding another ICO in 2019. The organization claims to have something different up its sleeve this time around, with the Karatbank coin, which is also confusingly christened KBC. It states to be developing the currency for its crypto bank located in Miami; this has compelled the Florida Office of Financial Regulation (OFR) to spearhead an inquiry into the organization, which is still going on. The inquiry is investigative in nature.

Karatbars’ homepage is home to several dubious videos, with a particularly over-the-top claim announcing Harald Seiz’s intentions to produce 20k millionaires by the year 2021. Goods sold on the website all fall under the category of products that can be sold under affiliate marketing. Regulatory authorities in the Netherlands referred to this gold purchasing/selling system as “multi-level marketing.” Namibia was much less kind in its evaluations and flat out referred to it as a pyramid scheme.

What about the actual gold, the idea on which Karatbars has been built? Independent research has been met with failure when attempting to verify the reality of the goldmine the company states they own. Cynics have frequently quipped that the alleged “gold mine” is merely a hole dug into the ground, owned and operated by a liar. In the Karatbars case, the existence of the hole itself is uncertain. 

When Mountie?

During the month of March, Canadian authorities froze accounts belonging to Lisa Cheng and Kevin Hobbs. Their company, Vanbex, managed to gather 22 million USD in funding by the sale of the Etherparty (FUEL) token. Notwithstanding claims that FUEL would be utilized to devise a smart contracts ecosystem, nothing of the sort occurred, with court documentation stating the lack of intention behind the development of this dream world. 

Hobbs had a history, and this provided additional flavor. The founder was convicted on allegations of possession and money laundering. Hobbs further claimed that his newfound riches came from gambling winnings of approximately 60k US$ monthly. He vehemently denied misappropriation of company funding. In simple terms, if Hobbs legit had the gambling ability that he claimed to have, the house is always at a loss – in a very literal sense. 

Royal Canadian Mounted Police (RCMP) documents demonstrate that the Vanbex ICO was complete on the 17th of August, 2017. Hobbs then made a withdrawal of approximately 5.5 million USD from the OTC trading desk Cumberland. The start of these transactions occurred a mere four days later on August, the 21st. Following this, Cheng and Hobbs allegedly embarked on a luxury spending spree. Even though the investigation into the fraud allegations is still ongoing, formal charges are yet to be filed. This, however, has not stopped detectives from freezing the duo’s bank accounts and claiming their personal effects – these include two Range Rovers and a Lamborghini. 

A Scam is a Scam is a Scam

April witnessed the conclusion of one of the highest-profile scams of the year. Korean authorities apprehended twelve individuals on allegations of stealing 18.7 million USD from aged investors through the use of a Ponzi scheme referred to as M-Coin. Most fascinatingly, authorities were alerted of the crime by AI, AI designed to pore over the internet for keywords and phrases. After the authorities received the alerts, the offenders were promptly traced and apprehended. AI is currently primed to look through scams, even when humans aren’t fully equipped. 

A cautionary tale

FUEL, Karatbar, and M-Coin are three exceptional circumstances where things got a bit out of hand. However, those who hold the belief that more humble indiscretions may go under the radar would do well to heed the tale of the adult content marketplace, Fantasy Market. Prior to being called up by the Securities and Exchange Commission this summer, founder John. C. Lucas raised a meager 63,000 US$. In keeping with the spirit of a scam, Lucas made several patently untrue statements (in a whitepaper and online) to compel investors to take part in the ICO.

Lucas falsely stated that the company’s adult-oriented entertainment platform had a working-beta version when no such thing existed. In addition, he put forth an administration team that were completely fictional and made misleading claims about his own experiences. 

After the findings of the Securities and Exchange Commission, Lucas agreed to make payments to the tune of 15,000 US$ to make amends, upon court approval. Ironically, even though Lucas managed to persuade investors to buy into a full fantasy market, the bigger daydream was his belief that he could get away with it.

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