Investors
have sent $1 billion into digital coin projects that flash warning signs for
fraud, The Wall Street Journal reported Thursday, citing its own analysis.
In
a review of 1,450 digital coin offerings, the Journal said it found that 271
bore red flags such as plagiarized documents or fake executive information.
Investors have already claimed losses of up to $273 million in these projects,
the newspaper said, according to lawsuits and regulatory actions.
The
coin sales, or "initial coin offerings," give investors the chance to
buy into a new digital token while letting developers get easy access to
funding. The process may be a little too easy for many projects that are
unproven or outright scams. Coin offerings have raised roughly $9.8 billion in
the two years through mid-March, according to financial research firm
Autonomous Next.
The
Journal found widespread plagiarism in 111 projects' online whitepapers,
including word-for-word copies of marketing plans and technical features. The
demand is so high that freelancers will write the papers for $100 or more, the report
said.
Lifting
images and names to create the appearance of a reputable development team is
also not uncommon.
One
Polish banker named Jenish Mirani found that his profile picture was used by
online payment project Denaro to portray its co-founder "Jeremy
Boker," the Journal said. The paper said no one responded to its attempts
to reach the company.
Many
initial coin offerings officially prohibit U.S. citizens and residents from
participating, out of fear of regulatory crackdown.
The
U.S. Securities and Exchange Commission has frozen assets and charged founders
with fraud in several cases of cryptocurrency scams. On Wednesday, the SEC also
launched a website called "HoweyCoins.com" to show investors what a
fraudulent coin offering might look like online.