Former New York Times Journalist Caught in $3.5 Million ICO Scam

  • Chinese-American Jerry Ji Guo has allegedly been involved in a $3.5 million ICO-related scam.
  • Guo, a former Newsweek and New York Times journalist, may face up to 20 years in prison for orchestrating fraudulent crypto-related schemes.

Jerry Ji Guo, a former journalist at Newsweek, New York Times, and the Washington Post, has reportedly been involved in a number of scams - including securing funding for a group-dating service from VC firm YCombinator, but then abandoning the project just eight months later.

Guo, a Chinese-American Yale University graduate, has also worked as head chef and owner at a burger joint in Beijing, China and helped start an Atlanta-based “growth hacking” marketing firm. In 2017, Guo launched a $2 million initial coin offering (ICO) to raise funds for a content-sharing program - which he claimed was backed by partnerships with American Idol and The Voice.

On November 9 2018, Guo was arrested by US Federal Bureau of Investigation (FBI) agents in Puerto Rico - on charges for allegedly being involved in a $3.5 million wire-fraud scam. Guo, who refers to himself as a “serial blockchain entrepreneur”, has been accused by American prosecutors of stealing large amounts of digital currency from blockchain startups that employed him as a consultant.

Facing Up To 20 Years Prison Sentence

On Friday, November 30, a San Juan, Puerto Rico federal judge ordered that Guo’s case be transferred to courts in San Jose, California. Notably, the Chinese-American 31-year-old will be facing an eight-count indictment. If found guilty, Guo may be sentenced to 20 years in federal prison by statute.

At a minimum, Guo would have to serve 5 years in prison if found guilty - as law enforcement agents have found that the so-called serial entrepreneur is behind a fraudulent scheme which was allegedly carried out under the guise of a firm called pressICO. According to US federal prosecutors, Guo had been promoting himself as an ICO expert and claimed to have help many projects successfully raise funds and launch innovative products and services.

Claiming To Launch Equitable Content-Sharing Platform 

As payment for his services, Guo allegedly asked his clients to deposit a retainer in what he claimed was an escrowed bitcoin (BTC) and ethereum (ETH) wallet - held with Palo Alto-based crypto firm BitGo.

In addition to promoting the questionable pressICO, Guo had launched another ICO called ICST (Individual Content and Skill Token) - which he said was a content sharing platform that would help talented musicians receive better compensation and recognition for their work.

Notably, Guo released several promotional videos, including one where he is pictured in a luxury yacht in Singapore. In the video, Guo says: “Imagine a future where anyone could be a content creator and be able to monetize their content.” As mentioned, he also claimed that his ICST project had managed to partner with The Voice and American Idol.

Running "ICST Idol" Talent Show

In fact, one of his promotional videos was titled: “Creators of American Idol’s crypto platform tour Asia”. Guo also reportedly ran an online talent contest called “ICST Idol” - which had been scheduled on key dates (before and after his ICO).

The winning prize for the online contest was 100,000 ICST tokens, an amount he claimed would be worth at least $5,000. Although it’s unclear who actually won the contest, Guo walked away with $2.5 million in ether in only 17 days from the ICO.

Shortly after raising the large sum of money, there were no new announcements regarding ICST. Vaibhav Namburi, who was listed as chief technical officer for ICST, told the Daily Beast: 

Ah weird. I helped them in their technical direction, as a technical advisor, for a few weeks and that was about it.

On August 19, Guo moved approximately $300,000 in ETH from ICST’s BitGo account to his personal crypto address, according to US federal prosecutors. Mark Matulich, a special FBI agent assigned to the case, revealed that Guo made many more transfers that same day - which were described as “systematically looting” escrowed BitGo wallets that he had opened on behalf of his clients.

Matulich also noted that Guo’s clients were not expecting that he would be able to transfer the funds by himself - as he had claimed that “he would not be able to transfer the cryptocurrency without their knowledge and consent because of BitGo's multi-signature solution to ensure security of funds.”

However, Guo reportedly bypassed the two-signature requirement by using backup keys that BitGo had provided him at the time he opened the accounts for his clients. In court documents, Matulich has alleged: “Guo provided little to none of the services promised to clients within the contract period.”

Genearing "Fake Facebook Likes", False Claims

Court papers note that Guo’s victims include Rate3 and Pental Global and that the Chinese-American citizen has so far transferred $3.5 million in BTC and ETH to his personal wallets.

The FBI’s investigation also found that Guo had claimed (on his resume) to have managed a $100 million ICO for Polymath. However, Matulich revealed: 

Polymath ended its relationship with Guo after about a month and a half because Guo did not actually do anything … [he also allegedly] generated what they believed were fake Facebook likes for Polymath, thus defrauding Polymath out of approximately $50,000 in up-front fees.

ICO Market Down 97% Since May 2018: BitMEX Research

Initial coin offerings (ICO) have only managed to raise $40 million so far this year, according to BitMEX’s research division.

Researchers at the Bitcoin Mercantile Exchange, or BitMEX, a Seychelles-registered and Hong Kong-operated cryptocurrency derivatives exchange, published a blog post on May 13th, 2019 in which they noted that the ICO market is down 97% since May 2018.

Companies “Changing The ‘C’ In ICO To An ‘E’”

According to BitMEX’s research arm, several blockchain projects have “changed the ‘C’ in ICO to an ‘E’, perhaps in an attempt to assist with raising capital.” Indeed, there have been quite a few initial exchange offerings (IEOs) which have been launched this year.

An IEO is also a type of crowdfunding campaign, however the fundraising process is usually facilitated by the management at a centralized cryptoasset exchange.

As noted in BitMEX’s blog, the Dfinity and Telegram ICOs (held during 2018) raised $1.7 billion and $195 million, respectively. However, the native tokens for both projects have not been listed.

Notably, the EOS ICO, which was launched by the management at Block.one, a Cayman Islands-registered open-source software publisher, generated a record $4.2 billion. However, the EOS token had been trading at -4% of its issuance price (at the time BitMEX released its report).

Projects Shutting Down Due To Regulatory Pressure

Due to regulatory restrictions, the highly-anticipated Basis stablecoin project was forced to shut down and the funds were returned to investors, BitMEX confirmed. Meanwhile, some seemingly promising projects such as PumaPay and UnikoinGold are currently trading at -93% and -88% of their issuance (at time of ICO) price, BitMEX’s researchers noted.

Going on to compare the funds raised via IEOs with ICOs, the data compiled by BitMEX revealed that the BitTorrent (BTT) token sale, held on Binance on March 2nd, 2019, managed to raise $7.5 million and the current “return vs IEO price” stands at 433%. Other IEOs also launched on Binance such as Fetch.AI and Celer are not doing as well, as their “return vs first exchange trade price” stands at -55% and -29.4%, respectively.

Most ICO Investors “Earned Strong Positive Returns”

Commenting on the relatively large number of IEOs launched in recent months, BitMEX’s research team acknowledged that the new type of crowdfunding model has been “somewhat successful.” The researchers confirmed that “smaller exchange platforms” have tried to introduce IEO models which are similar to those used by major exchanges including Binance, Huobi, Bittrex, and OKEx.

Most IEO investors have “earned strong positive returns based on the IEO [issuance] price,” BitMEX revealed. However, the researchers have found that the return on investment (ROI) has been “typically poor” after the tokens began trading actively on various exchanges.

According to BitMEX’s estimates,$38.9 million have been raised so far this year through IEOs (as of April 25th, 2019). Notably, Binance, the world’s largest exchange in terms of trading volume, has been “the most prolific IEO platform by a considerable margin,” BitMEX’s researchers concluded.

Some other key observations made by BitMEX’s research team are as follows:

  • “On average, only 4.4% of the total token supply [has been] made available in [IEO token] sales”,
  • “There are opportunities for project teams to make considerable profits from selling coins they granted to themselves,”
  • “The 2019 IEOs were priced at a level which implies a total market capitalization of $907.7 million, based on the disclosed total token supply.”