PlexCoin offered guaranteed 1300% returns or your money back. That is a pure scam.
I see ICO's as marketing investment opportunities to unaccredited investors. I thought unacreddited investors in the U.S. are legally allowed to invest in public stock, and approved securities (like bonds, precious metals, etc) and only a handful of other things.
The notion of accredited investors legal requirement to invest in tech startups is that tech startups are inherently very risky, and the average person shouldn't be allowed to put their life savings behind something so risky. By this logic, it strikes me as very odd that ICO's are legal for U.S. citizens to invest in, and my guess is it's because the SEC hasn't come around to regulating them yet.
Does that sound correct, or is there reason to believe the SEC (in the long-term) will be okay with unaccredited investors investing in ICO's of tech companies? Are there other things with a similar risk profile that unaccredited investors can invest in?
Any ICO marketed as an investment is likely illegal in the United States. Not necessarily a prima facie scam, but in violation of the Securities and Exchange Act.
1) Filecoin and other ICOs are using Cooley's SAFT instrument in order to comply with US securities laws, and as a result, have limited marketing to accredited investors.
2) Lots of ICOs are banning US investors.
These are two separate acts: the Securities Act of 1933 [1] and the Securities Exchange Act of 1934 [2]. (Pedantic, pardon me.)
[1] https://www.sec.gov/about/laws/sa33.pdf
[2] https://en.wikipedia.org/wiki/Securities_Exchange_Act_of_193...
1) VC money comes with strings, and founders don't like to have the sword of Damocles hanging over their heads. (Although I think those founders are misguided, as I think most companies benefit from oversight).
2) ICO money is cheaper and plentiful. If it's available, why not take it? This is especially problematic when you have multiple companies pursuing the same idea. Take using the blockchain to create a data storage market. Filecoin raised $200mm+. Imagine they instead raised $3mm from VCs, and another competitor with less qualms raised $200mm. They would now have to compete with someone wayyyy better capitalized than they are. In the tech world, one company often wins the market. Being second could kill your company.
Is Uber scamming middle east sovereign wealth funds because they are letting them invest on crazy terms, when they could just as easily start turning a profit or go public? I think a company has a duty to: (1) disclose things honestly, (2) warn people of the risks, and (3) consider the danger of raising too much public money on the success of their venture. Beyond that, if investors wants to dump cheap money on them, why is it a 'scam' to accept?
Given the huge problems with current ICOs (Outright scams, or simply terrible investments), it seems that being smart or talented are not the qualities ICO 'investors' are looking for. I think the zeitgeist is that they just want quick pump & dumps.
Even the current public market interest in the blockchain space, regulated as is is, is mostly driven by a good story and a hope for the future.
This is how things work, and given a longer time horizon, the market will sort it out.