With the Securities and Exchange Commission moving to crack down on fraudulent crypto-schemes, the allure of crowdfunding capital through initial coin offerings on blockchain platforms appears to be fading.
While such investments offer ease of entry – no lawyers, banks or regulators needed – they have also proven ripe for graft, with many schemes lacking viable business models or track records.
At the close of the fiscal year, and a year after the formation of its Cyber Unit, the SEC reported it had taken enforcement actions against more than a dozen digital assets and ICOs.
“Some of the offerings are simply outright frauds cloaked in the veneer of emerging technology,” the regulator stated in its annual report.
Many investors, attracted by the promise of a game-changing technology, learned this the hard way.
In 2018, the fever pitch around ICOs seemed to fall as rapidly as it had risen.
One research company, ICORating, found that while the ICO market more than doubled in a year – raising more than $11 billion in the first half of 2018 – 55 percent of ICOs in the second quarter of 2018 failed to reach their crowdfunding goals.
The founder of one crypto-crowdsourcing platform recently voiced what has become a common sentiment in the blockchain space. After shuttering its proverbial doors last year, the Cofound.it CEO Daniel Zakrisson wrote in September: “The community-driven ICO concept of crowdfunding [is] dead.”