Crypto Initial Coin Offerings have been big business since 2017, raising $20 billion according to Autonomous Next. And that’s just the ICOs that have brought in $1 million or more. Although there’s been a slowdown in the number of ICO entities this year, assets are still increasing.
But an uptick in crypto assets might mean a greater opportunity for fraud. A University of Pennsylvania Law School’s review of 2017’s 50 largest ICOs by amount raised found significant discrepancies between the ICO code of conduct and the “contractual promises” made by ICO promoters.
Only about 20 percent of ICO codes matched what was promised, in their entirety, according to the study. “In a financial ecosystem built around the proposition that regulation is unnecessary because code is the final guarantee of performance,” said David Hoffman, law professor and one of the report’s authors, “... often ICOs are not embedding the governance promises they make.”
The “nebulous contractual relationship” between promoters and buyers of tokens leaves buyers vulnerable. “At least some popular ICOs have retained the power to modify their currency’s rights, but have failed to disclose that ability to investors in plain language,” added Hoffman.