October 18, 2019
The ICO token sale model reached its peak back in 2017, but as soon as the crypto space started receiving a larger cash flow, scammers moved in and started taking the investors' money for themselves. The number of scams skyrocketed, regulators around the world cracked down on ICOs, and the token sale model pretty much died.
Since then, it got replaced by a safer alternative, IEO, which started in early 2019. So far, IEOs have been performing rather well, and scams are all but eliminated from it. However, ICOs are still around, as scammers never actually left the space. This does not mean that every ICO today is a scam, but it does mean that any of them could be. With that in mind, there are some projects that were confirmed as scams but still remain somewhat lesser-known.
Cryptocurrencies backed by real-world assets have been a popular concept at one time, especially those backed by gold. This inspired one German company to launch a coin known as Karatgold Coin (KBC), back in 2018. The project's ICO supposedly raised over $100 million, which is a massive amount for a year that saw a massive ICO crackdown.
The company, known as Karatbars, then decided to launch another ICO in 2019, this time calling their coin Karatbank Coin (also KBC). Naturally, the strange behavior alerted the authorities, and so did many other inconsistencies and red flags. Eventually, the project was declared a pyramid scheme, while the supposed gold mine that the company owns was never found or verified.
Earlier this year, in March 2019, the authorities in Canada froze two accounts belonging to Lisa Cheng and Kevin Hobbs. The two owned a company called Vanbex, which held an ICO in 2017, and managed to raise around $22 million by selling a token called Etherparty (FUEL).
Initially, the project claimed that FUEL would be used for the creation of smart contracts, but no such efforts were ever made. Eventually, the court decided that the project was a scam, and that its 'developers' never actually intended to honor any of their promises. Furthermore, it was also discovered that Hobbs had previous convictions related to money laundering and drug possession. He even claimed that his funds came from gambling, and not from inappropriate use of the company's funds. While the charges have yet to be brought, the investigation continues, and the two Vanbex owners still have their funds frozen.
Another case from April of this year saw the arrest of 12 people by the Korean police. Arrested individuals were suspected of stealing $18.7 million from elderly investors through a scam known as M-Coin. Interestingly enough, the scam was not reported by a scammed investor, but rather an AI that searched the web for certain keywords and key phrases. In other words, AI development seems to progress nicely, and it can recognize scams even when people can't.
Finally, there was also a smaller-scale scam whose orchestraters only raised a small amount before being caught, meaning that every scam will be hunted down by the authorities, with or without millions of dollars involved. The project was called Fantasy Market, and it was an adult content marketplace, founded by one Jonathan C. Lucas. The scam raised only $63,000 before the authorities ended it, and the SEC stated that it quickly caused suspicion because Lucas made numerous false statements in his white paper.
Lucas' management team did not exist, and neither did the adult entertainment platform, while he claimed otherwise. He also lied about his experience. After the investigation, Lucas agreed to pay $15,000 to resolve the claims, although the court approval is still pending.
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