ICO Woes: Exit Scams Approach $100m as Median ICO ROI for Q2 Revealed to be -55%

Avi Rosten

New research shows some of the scale of the problems facing the ICO economy.

Firstly, research published today by blockchain intelligence firm - Diar - show how the fraud that is plaguing the burgeoning crypto economy has continued at full pelt - with that the total sum of money lost to successful exit scams is now approaching $100m.

In the past week alone the report explains that the biggest exit scam to date was uncovered, as Shenzhen Puyin Blockchain Group, a Chinese company behind three ICOs - ACChain, Puyin Coin and BioLifeChain - ran off with $60 million worth of investor funds.

Now being investigated by the Chinese State Market Regulatory Administration (SMRA), the scam is just the latest in a seemingly never-ending string of outright ICO scams.

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In one unfortunately ironic case, an ICO called BlockBroker with the stated aim to “completely eliminate ICO fraud by creating a 100% safe investment environment,” emerged itself as another exit scam.

Scams vs. Poor Project

Interestingly the report also highlights what is perhaps a bigger problem for the space as a whole: legitimate, but under-performing and under-delivering projects.

With Diar finding that the top 10 ICOs that have been trading for more than 6 months have dropped an average of 93% in price, it is these numbers that will be more alarming to those who are interested in the long-term health of the ecosystem.

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In this regard, some other research published recently by ICOrating, also shows how serious the problem has become - revealing among other things that the median return for ICO investors in Q2 2018 was -55.38%.

Furthermore, the report showed that 53% of DApp ICOs were unsuccessful (I.e. raised less than $500,000) - a finding that correlates well with the surprisingly low user figures for all DApps.

As the ICO frenzy continuing seemingly unabated in 2018 - with ICOs raising more than $8 billion in Q2 - shrewd investors and enthusiasts will hope that the market regains some sense of balance as the industry continues to expand.