Former Wall Street stockbroker/fraudster Jordan Belfort has dismissed ICOs, or initial coin offerings, as “the biggest scam ever.”
A radical new form of fundraising, ICOs are essentially the sale of cryptographic tokens as by startups in exchange for financing via cryptocurrencies like bitcoin and ether to fund early-stage startup development. Earlier in September, decentralized storage project Filecoin raised $257 million, an ICO record. According to one tracker, ICO fundraising in 2017 has topped $3 billion, so far.
Jordan Belfort, a former Wall Street penny-stock broker who plead guilty to stock market fraud, has opined that the current craze surrounding ICOs is going to end in a way that will “blow up in…people’s faces.”
Speaking to the Financial Times, he stated:
He stated:
It is the biggest scam ever, such a huge gigantic scam that’s going to blow up in so many people’s faces. It’s far worse than anything I was ever doing.
Belfort claimed ICO promoters are following “pump and dump” boiler room tactics of aggressive promotion to stir investor interest before selling all the tokens before a price collapse.
“Promoters [of ICOs] are perpetuating a massive scam of the highest order on everyone,” Belfort said. “Probably 85% of people out there don’t have bad intentions, but the problem is, if five or 10 percent are trying to scam you, it’s a fucking disaster.”
Belfort went on to compare the current excitement for ICOs – which sees participation from startups and corporations alike – to that of “blind pools” in the 1970s and early 80s when brokerages raised funds from investors without disclosing how the money would be spent. Brokers earned big fees before these trading “pools” were dissolved, without a single investment.
Belfort added:
Everyone and their grandmother wants to jump in right now. I’m not saying there’s something wrong with the idea of cryptocurrencies, or even tulip bulbs. It’s the people who will then get involved and bastardise the idea.
Belfort has also been critical of cryptocurrencies recently, agreeing with Dimon’s infamous statement on calling bitcoin ‘a fraud.’ The Wall Street criminal-turned-author spent 22 months in prison as a part of his plea agreement.