There’s a new reality many of us in the business world can’t escape — discussions about cryptocurrency.
Water cooler conversations, dinner parties and post-work drinks are now riddled with ordinary people giving ‘expert’ opinions on when to buy and sell, and when the Bitcoin bubble will burst (it may already have).
Unfortunately, the world of cryptocurrency is not all its cracked up to be. Scams and schemes plague the market, brought on by a lack of regulation internationally. In face, Facebook recently decided to ban all advertising for cryptocurrencies as they carry the risk of being scams.
With an exponential influx of initial coin offerings (ICOs) and unregulated currencies driving policymakers nuts, it’s important to remind ourselves of a few times cryptocurrency investments didn’t go as planned.
A recent tragedy, Prodeum was marketed as a “vegetable-based” cryptocurrency hosted on the Ethereum blockchain. The product was strongly marketed with a sleek website and links to team bios on LinkedIn, and was subsequently picked up by many news outlets. However, despite claims it was seeking to raise $US6.5 million, Prodeum’s ICO raised a gobsmacking $US11.
In late January, all traces of Prodeum suddenly vanished. Its Twitter account was deleted and its website wiped blank, leaving nothing but the word “penis”.
https://twitter.com/_righttothemoon/status/958037446804975616
lololololol it looks like Prodeum was paying people from Fiverr to write its name on their bodies pic.twitter.com/501JVdpKZM
— Ryan Mac 🙃 (@RMac18) January 29, 2018
Those who contributed to the overall $US11 of Prodeum raised have yet to recover the stolen funds.
Bitconnect is a Bitcoin blockchain-based cryptocurrency that launched its ICO in November 2016. The company behind the currency also produced a ‘block explorer’ visualising blockchain transactions.
However, as Coindesk reports, Bitconnect is currently caught up in a legal case over allegations it is a Ponzi trading scheme. This follows cease-and-desist notices issued by the states of Texas and North Carolina over its second ICO for BitconnectX because of concerns it hadn’t followed proper public trading procedure.
Bitconnect has since closed down its lending and exchange platform.
Speaking of Ponzi schemes, this next one is exactly what you think it is. Ponzicoin was established in 2016 with a tongue-in-cheek approach to the number of cryptocurrencies and ICOs out there. It is an Ethereum-based cryptocurrency that doubles in price every time 100 tokens are purchased, meaning early investors receive income from newer ones.
Its whitepaper was a link to a warning document from the US Securities and Exchange Commission and its website doesn’t hide its true colours:
Q: Is this a scam?
A: Yes, it’s as much a scam as 99% of the ICOs out there, but it’s more transparent about it 🙂
The developer behind the project has since stopped trading operations for all of Ponzicoin, saying: “This has gotten crazy out of hand, I apologize but we will no longer be selling PonziCoin on this site because this was a joke.”
Digital wallet provider Parity has been the victim of multiple hacks, leading to roughly $US160 million ($202 million) currently frozen to investors.
In July last year, Parity wallets were hacked, resulting in the loss of 150,000 ether, worth a combined $30 million at the time. Developers labelled it a critical security issue and some users of Parity were instructed to move their wallets to a more secure address.
The second hack was caused by someone ‘accidentally’ using a command to delete code library in the Parity wallet that wasn’t patched by developers. As a result, $152 million worth of ether was frozen and has yet to be retrieved.
In a similar vein to Prodeum, another startup called Confido has been tied up in legal issues after being accused of taking the money and running.
The “smart contract” startup had raised $US375,000 via in ICO but in November last year, Confido’s team disappeared with no explanation to investors. Its website and social media accounts were also blanked, which led to its token value plunging. After widespread confusion, cryptocurrency exchanges ceased the trading of Confido online until further information was released by the company.
In late December, Confido said it would be refunding all tokens at a nominal price derived from the value of the total assets divided by the number of tokens sold, meaning some investors would have received less than what they put in.
NOW READ: The ATO is still deciding how Bitcoin will be taxed in the future
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