One in three United States cryptocurrency investors who participated in initial coin offerings believe they were deceived.
ICOs powered the crypto boom/bubble of 2017, but they were slapped down and effectively banned by the Securities and Exchange Commission, or SEC, which declared virtually all of them illegal unregistered securities sales. The result ranged from multi-million dollar fines to the outright killing of projects such as Telegram’s TON blockchain.
The Dec. 1 study, “ICO Investor Sentiment and Outlook Review 2020,” was produced by crypto asset disclosure platform Xangle. It found that 33%—one third—of the United States investors who took part in ICOs feel they were deceived by the sponsors. Of that group, 54% said they believed that the project’s founders should be prosecuted criminally. Xangle co-founder James Junwoo Kim said:
“The survey findings confirmed our belief that there’s a lot of opportunity and need in the crypto industry for better transparency and visibility for upcoming crypto projects, which can build investor trust and confidence.”
On the other hand, the survey of 600 investors showed that 56% of the once-burned investors said they would make another investment—but felt they needed to do more research.
In addition, the investors surveyed said a lack of regulation, awareness, and security is holding the crypto market back, with more accountability, information and investor protection needed.
Which is roughly what SEC commission member Hester Peirce—also known as “crypto mom” for her pro-industry positions—has said. She has also called for a regulatory sandbox in which cryptocurrency projects can launch.
ICOs: the wild west of the investment world
The ICO space is now mostly dead, but those who were already part of the cryptocurrency community in 2017 remember that it was a flurry of activity ripe with scams, projects of dubious value and even some innovation. The repercussions of that ICO activity can still be seen to this day.
As Modern Consensus reported in mid-September, six months after rapper T.I. beat a civil suit charging securities fraud over the FLiK initial coin offering, the Securities and Exchange Commission fined him $75,000 over the fraudulent offering. Furthermore, a May class-action lawsuit against EOS’ blockchain software developer Block.One recently called the project’s $4 billion ICO “biggest of all crypto frauds.”