The rapid growth of cryptocurrencies has led to an ICO industry with a turnover of up to $50 billion from 2017. This was done in the false assumption that no regulation was applicable for the crypto-world. The ICO-hype will now be followed by a massive litigation hype. The responsibility of the media and the many other “advisors and supporters” for the loss of investor money will thus also be dealt with.
The DotCom boom was nothing compared to the ICO-Hype
The extent of the ICO-Hype in the crypto scene is unprecedented in recent financial history. In contrast, the DotCom boom is comparatively modest (we know this from our own experience!). The DotCom boom of the so-called new economy took place within the regulatory framework and was limited to the then leading industrial nations. Back then private investors from Russia, China and South America, the Middle East and Africa participated in the boom only to a limited extent. These countries, on the other hand, participate massively in the ICO hype, both on the part of Token Issuers and investors. Dubai, for example, is something like the Delaware of the crypto-MLM scene next to Zug (Switzerland).
Multi-cultural scene beyond regulatory standards
Within a few months from spring 2017, a global, multi-cultural ICO scene developed at breathtaking speed, which celebrated and motivated itself at the countless blockchain events held. Tokens and smart contracts were celebrated as a disruptive phenomenon that would take place in a supposedly regulatory free space and therefore would not require any supervisory authorities. Regulation was yesterday, self-regulation is today and blockchain-based self-regulation will be tomorrow, so the credo lived in the scene. The regulatory authorities of the individual countries had and obviously have no clued, and in addition, there is also a lack of a global body to deal with the global phenomenon.
Obvious negative side effects such as a high use of cryptocurrencies on the dark markets have been judged by the scene as a necessity for further development. The ICO hype was fuelled by the massive rise in the valuation of the cryptocurrencies in the last few months of 2017, when countless “so-called” bitcoin, blockchain and ICO Advisors suddenly appeared on the social media, who allegedly had been dealing intensively with blockchain for years and are now prepared to offer their “valuable” consulting services to companies for excessive fees. Old-established self-employed insurance brokers discovered in autumn 2017 that it was much easier to sell crypto mining packages – of whatever kind – to men or women than to sell insurance policies, life insurance policies or loan contracts.
At the beginning of January 2018, the entire cryptocurrency market reached an unimaginable market capitalization of USD 750 billion. Between January 2017 and June 2018, some 1,500 new Tokens were sold via ICOs and some 20 billion USD collected from investors. These figures are estimates because transparency does not and did not exist in the ICO market. We, at FinTelegram, think that the number of unreported investor funds actually collected via ICO, Token Sales, and MLM systems is significantly higher and more likely beyond the 50 billion dollars.
In the meantime, Tokens are in the free fall
A short visit to the crowdsourcing website Dead.coins shows that there is not much left of the hyped Tokens. Meanwhile, we also know that many of the crypto hedge funds, as well as many of the crypto HODLER apologists, sold massively into the market in January 2018.
The number of reports to supervisory authorities and law enforcement agencies is increasing and it is becoming increasingly clear that there have never been as many and above all as outrageous scams and fraud systems as in the crypto era: Token Project Owners from the new “bubble nations” such as Russia, China, and the South American states, in particular, present themselves as gamblers and enjoy their “offshore” position. On the other hand- to date only regionally active – self-employed insurance brokers suddenly discover the African investor! Thanks to resourceful web marketing agencies and blockchain technology as the infrastructural backbone for processing money movements, globally designed fraud systems can and could take on an unprecedented scale.
Media – #fake news, manipulators, and profiteers
Media, ICO Advisors, and celebrities have played and continue to play a prominent role in this crypto-hype. Especially in the second half of 2017, the online media were full of largely uncritical coverage of Token-Sales, resulting in considerable cash for these media companies. We know of countless media websites set up exclusively for the purpose of hyping ICO’s and the crypto-investment scene in 2016 and 2017.
Interviews and opinions of self-appointed ICO consultants – whose only obvious quality criterion was the high number of Linkedin contacts – were passed on without reflection. Using platforms such as ICObench, the project operators could buy the so-called experts at will, list them on websites and white papers as their consultants to enable the success of their token sales. In most cases, no advice was given, only cash was collected and sales-promoting postings were made in the social media.
One example is John McAffee, the developer of the anti-virus software of the same name. McAffee has collected up to 25% of the daily issue proceeds to sell token sale promoting tweets to its Twitter community. Allegedly McAffee had to employ a whole team of people to handle the many requests.
The token as the goal in itself
In the ICO hype, selling the tokens was the means and the end. The big rush money did not come over the time axis according to project progress – as was the case with the usual financing of start-ups, – but was based only on a rough Idea. Perfect for scams and fraud. In many cases, an innovative Token project was conceived on paper, and it should be noted that “copy” and “paste” have demonstrably played an important role in many white papers. The crypto investors were hungry for the Tokens and to speculate with them on the newly created crypto exchanges. What the shovel manufacturers were in the gold rush were the crypto exchanges in ICO hype: the real winners. Listing a token was the real challenge and opened the door to absolute speculation hype and market manipulation: because insider regulations etc. did not and do not exist on these crypto exchanges. The absolute robber baronry applies: the last one the dogs bite.
The systematic rip-off of investors using ICOs has subsequently prompted Google, Twitter and Facebook to ban advertising for them on their platforms. This was good news for the crypto-media, who got a bigger part of the gigantic advertising cake.
Bitcoin Corner and media responsibility
Bitcoin Corner, a German project that claims to establish a crypto-bank with a worldwide branch network by means of a banking license granted by the German BaFin, currently shows how grotesque the marketing of ICOs can be. No, of course, they don’t have a license yet, but you can’t tell that from the marketing statements in the digital Boiler Rooms on Telegram and Facebook. The marketing strategy and operation of the digital boiler rooms is made recognizable by professionals.
The project is to be recognized by everyone halfway with crypto experienced humans simply as at least questionable scheme, if one wants to formulate that politely. It is therefore surprising that reputable media such as the BTC-Echo, accept a paid press release.
On Facebook, a group that has often been used for various crypto-schemes has been put at the service of Bitcoin Corner. This results in 33.000 Facebook-followers for Bitcoin Corner in one fell swoop in this boiler room. The same group has already hyped some scams like CryptoGold and supported other crypto-MLM systems. The operator of this Facebook group has turned it into a business model.
No silly strategy has at least ensured that several thousand people have already seen the Bitcoin Corner video. That’s impressive, isn’t it?
Even in the case of a paid press release, we believe that the media should maintain a certain ethical standard. To distribute clearly recognizable nonsense without reflection also justifies responsibility. It becomes worse if unreflected reports about such nonsense are used as an editorial contribution, as is the case with Bitcoin Corner in Inside Wirtschaft, for example.
In the USA, the first promoters and media are already being called to account by regulators and investors. You don’t have to be a rocket scientist to predict that many more lawsuits are to be expected worldwide. Disappointed investors tend to look for culprits and there are many in the crypto-world.
The Great Finale – The upcoming Litigation-hype
Billions of investor funds have been moved in the Token Sales. Even after the collapse of the cryptocurrencies, there are still many millions of them and more pouring in every day. Disillusioned investors will want their money back even with good projects, as can be seen in the case of TEZOS, for example.
The disappointed supporters meet quite willing lawyers, who will have an easy job in view of the obvious negligence of the project operators and their Advisors and expect correspondingly high litigation-fees.
We are contacted daily via LinkedIn and email by lawyers who ask for information or offer their support for disappointed crypto investors. In this respect, we can forecast that over the next two years after the collapse of the ICO hype we will experience an unprecedented litigation-hype. And we dare to hypothesize that also this lament hype will not be comparable to the Katzenjammer after the bursting of the dot-com bubble in 2001.