Recently we have been writing a lot about Initial Coin Offerings (ICOs) not only because the news is awash with coverage of fraudulent ICOs but also because we are being approached by a growing number of new clients who have unfortunately fallen victim to this type of digital scam.
If you’ve missed the advent of the ICO it is basically a new take on the more traditional IPO (Initial Public Offering) in which the company seeking investment offers its investors its own crypto-currency in return for their cash. The theory is – and it is admittedly a theory supported by an increasing number of success stories – that the coins will be worth a great deal more once the company is up and running.
As public interest grows, so does the number of start-ups choosing to exploit this new funding stream. After all it allows the company to circumvent venture capitalists (and their fees) and allows them to raise millions of dollars in a shorter time and keep almost all of that money for themselves.
While an ICO is not hugely complicated, industry experts say it is about to become even easier. Polymath Inc., a Canadian technology company, has created an investment platform designed to walk businesses interested in launching and ICO straight through the process from creation to fundraising and, if necessary, onto further rounds of trading. Polymath also claims their platform will work for any entrepreneur regardless of how well developed they are tech-wise.
More importantly the creators claim it will also comply with the increasingly rigid international regulatory environment currently being created around ICOs, a move many of the world’s financial markets have pushed hard because of the rising number of and increasing publicity around fraudulent ICOs.
If the Polymath platform takes hold it is highly likely that it will ultimately create a spike in the already booming token sales market. It will also make it even easier for entrepreneurs to access a greater number of potential investors, all anxious to take full advantage of an investment vehicle that has raised a total of almost $2 billion in less than two years because, according to reports, there is the possibility to double ones money in a matter of days.
However, our concern is that making it easier to run an ICO could well make it easier to run a fraudulent ICO. Although the potential returns are without doubt enormously attractive to an investor, the fact is a number of companies launching offer little more than a website and a slick sales pitch. This is where people are becoming unstuck.
The golden rule when it comes to participating in an ICO is to make sure you perform comprehensive due diligence on the company you are about to invest in before you buy your first token. Search on the company, on the owners and on the technology they are purporting to launch. If there is any suggestion of any impropriety or any negative chatter online, don’t progress your interest.
Similarly make sure you request a copy of the company’s full business plan and of any previous investment or investors. If there is nothing to hide, the company will not be concerned about providing that information but if they prove reticent or obstructive, don’t progress your interest.
However, if you have fallen victim to an ICO fraud or any other type of digital scam our team of solicitors have all of the specialist legal experience required to resolve every type of digital fraud you will need. Call us today on 020 7792 5649 or email us at firstname.lastname@example.org and we will explain what you will