Exit scammers run off with $660M in ICO earnings | Hacker News Reader

Exit scammers run off with $660M in ICO earnings

techcrunch.com

207 pointsdbasedweeb161 comments

> "Investors have been told that they would enjoy a profit rate of 48 percent a month from their initial investment, and recoup all investments after four months. People would also be rewarded with an eight percent commission for every new member they have introduced to the network."

There's your red flags right there.

This is one thing most people don't understand. If someone is selling you a financial instrument with >6-7% annual returns, it's as ridiculous as someone selling you a time machine or the cure to death.

The top 500 companies by market cap don't do much better than 6-7% annually on average.

> >6-7% annual returns

I wouldn't say quite that low, even S&P averages are often higher than that.

But 48% monthly is going to be something like a >1000% yearly interest rate. You really don't get much more of a dead giveaway than that, at that point you're either a fool or you're gambling and hoping you get out before a greater fool does.

    >>> 100*1.48**12
    11044.360771961152

That's ELEVEN THOUSAND percent a year. 110x your money every year. That's enough to turn a dollar into 16 billion in 5 years.

Yeah, I managed to miss a digit when I ran the numbers myself so I was off by an order of magnitude when I wrote my post. Glad you checked it. Fucking hilarious what these guys will say - of course, I think that's a goal, to shock anyone remotely reasonable or who even tries to do back of the envelope math out of interest in it.

> That's enough to turn a dollar into 16 billion in 5 years.

I think it's actually 1.6 trillion

It's actually 16 billion.

Willfully participating in a Ponzi scheme is a crime.

Rather than Ponzi scheme, I'd classify the investors as participating in a Pump & Dump.

A Ponzi scheme is when it's an investment vehicle (i.e. hedge fund) that provides returns to older investors through capital acquired from newer investors. In this case, by contrast, it's overhyping (to the point of fraud) a publicly traded security in hopes of rallying some investors to buy in, which increases the price, further validating the potential and convincing more investors to buy in.

Merely participating through buying in a Pump & Dump process is completely legal; it only becomes illegal if you're the party using fraudulent information to increase the value of the security.

> A Ponzi scheme is when it's an investment vehicle (i.e. hedge fund) that provides returns to older investors through capital acquired from newer investors.

Isn't that exactly what they did?

From the Article:

Pump and Dumps make their money by selling the asset once it's price has been inflated. In this case, the money was made throughout the whole ICO by fraudulently selling a security.

Offering bonuses for bringing other people into the program is a Pyramid Scheme tactic. Ponzi is specifically in cases where there's a portfolio manager or something controlling the entire operation and allocating returns to early investors through distributing the capital of the new investors.

That's what Pincoin did

>The company first ran the Pincoin ICO, promising constant returns to investors

>Investors have been told that they would enjoy a profit rate of 48 percent a month from their initial investment, and recoup all investments after four months.

Were they actually given that profit rate from the Pincoin team, or promised that the coin's value would increase?

This really seems like a mess of illegality either way haha.

From the article:

> Pincoin was particularly unique in that it offered bonuses for bringing other people into the program, a tactic that might sound familiar. The scammers paid out in cash until January when they began sending iFan tokens. Then, last month, the team vacated their fancy offices leaving only an oddly well-made – if incomplete – website in its wake.

Are suspicions really enough to put you into illegal territory here?

If so it'd be a very hard crime to prosecute as unless you were working for them or something it's very hard to prove you aren't just another victim.

> Willfully participating in a Ponzi scheme is a crime.

Really? Which crime exactly?

Take something like this, for instance:

https://ponzischeme.io/

What is the crime?

Regarding your example, you're asking the wrong question. That's not a Ponzi scheme because it makes it clear what kind of returns to expect and that the returns simply come from other investors. A Ponzi scheme involves persuading investors to invest (and reinvest the returns) on a fraudulent basis.

What Charles Ponzi did, and what has come to characterize Ponzi schemes today, is fraud. He made investors think that they were investing in something tradable (stamp coupons) when he actually only ever paid the returns using other investors' money, and it was able to go on for so long because most people simply reinvested their returns on the basis that they thought it was a sustainable investment.

This dynamic doesn't exist without fraud. No one is going to invest in ponzischeme.io on any other basis than exactly what it is, betting to get in early and to cash in their returns before everyone else does.

That said, if I was the world dictator, the ponzischeme.io guys would be in a labor camp, where they would be forced to do meaningful work.

Cryptocurrencies did manage to have a ridiculous performance over the past few years, I think that's why those obvious scams manage to convince people. The fear of missing out is strong and many people want to exploit that it seems. There are so many obvious scams running in the cryptocurrency world right now that it's hard to keep track and some are more obvious than others. See for instance https://getcryptotab.com/en/ which is an other obvious pyramid scheme.

Take look at Argentina's market. You can get 20% of return on yearly bonds in dollars. Yes, its a bubble but its more mature than any kids ICO

> You can get 20% of return on yearly bonds in dollars

Argentina has basically turned defaulting into a sport [1].

[1] https://en.m.wikipedia.org/wiki/Argentine_debt_restructuring

Exactly. Return and risk are inherently linked.

Anyone lending money to Argentina does so knowing their money is 50% not coming back.

I know nothing of Argentina finance, but if I take your sentence a facevalue, my assumption is that they have a high rate of estimated future inflation.

There is no free money in finance.

Argentina is legendary for bad credit, so that's why returns have to be so high

> There is no free money in finance.

There can be free money in the sense that a strategy can beat the market at a similar or lower level of risk. The "cost" for this is in personnel and infrastructure capital.

> I know nothing of Argentina finance

They have a big sailing ship and an (obviously unpleasant) guy in New York got it impounded in West-Africa a few years back (purely from a sailor's perspective).

In brazil we have investiments that yield more than 10%... but market swings (and overall "brazil cost") add risk into it.

>This is one thing most people don't understand. If someone is selling you a financial instrument with >6-7% annual returns, it's as ridiculous as someone selling you a time machine or the cure to death.

A 2X leverage ETF would have double that rate of return, minus the overhead and interest on the leverage. Of course, it would also have double the losses in down years. With enough leverage, you can "easily" create arbitrary levels of annual returns, just by increasing risk.

.. by increasing risk to the extent that you can lose more than you invested, yes. Leverage is quite dangerous for retail investors.

> This is one thing most people don't understand. If someone is selling you a financial instrument with >6-7% annual returns, it's as ridiculous as someone selling you a time machine or the cure to death.

That's actually pretty achievable using market neutral strategies. Considerably higher is also achievable, you just can't really access them unless you have a lot of capital. However, 6-7% per month would be much more suspicious and should be an immediate red flag.

In my industry (e-commerce, sell on Amazon FBA) my biggest bottleneck is funding and I'm able to generate triple digit yearly returns on capital. It's gotten to the point I sometimes carry a balance on credit cards at 20% rates just to get more inventory.

But of course it's not quite comparable, it's extremely time / labor / logistics intensive, it's hard to put large amounts of money to work, and risk is high (can diversify across different products and categories but will always be some risk).

If you make 20% ROI and turn inventory every 2 months, that's a 120% return per year and very doable. A popular factoring company in the space, Payability, is charging an effective ~200% APR on funds (2% of gross sales for an average of one week to advance 80% of net, simple factoring math). That should give you an idea of the kind of returns people are making on capital, if the companies that finance them can ask for and get triple digit effective interest rates.

But it's not something you can put $100 million into. If you look at the bigger companies doing this, they have much lower returns (e.g. etailz sells ~150 million a year, profit of 3 million, they carry inventory in the 15-20 million range - so something like 20% net ROI per year).

If someone told me they were making 6-7% per month selling inventory direct to consumer, I'd consider it average, probably room for improvement.

So stop investing in average companies. You have any idea how much the FANG stocks alone have made me? I bought 200 shares of Amazon 3 years ago at 2 to 1 margin at $367, go look at the monstrous gains I’ve had up to today...

Shell is Yielding 5.5 now and if you brought in the past and took advantage of the BG merger last year (as I did) you could have an expressed yield of just over 7%.

7% a month and id agree with you

Here we call it "condo". It's somewhat insane that people base their futures on their home gaining 20+ percent per annum

7% is not ridiculous at all. twino.eu has been paying 10-13% backed by their own guarantees and a good income stream for several years.

Noooooooooo

Past performance is not an indication of future.

It’s not speculation - it’s a continuous income stream. Of course loan rates may go down but there is no risk about “performance”.

> loan rates may go down but there is no risk about “performance”

They can default. Twino is a Latvian LLC [1] that walks back its “guarantee” in section 7.4 of their User Agreement:

“TWINO shall not be held liable neither by the Investor, nor by the Assignee, or their legal successors or heirs, or any Third Parties in the event that the Loan Agreement is not performed by the Borrower completely or in any part thereof and if the Claim is not repaid and settled.”

If you think you have an investment with “no risk about performance,” you should not be investing your own money.

[1] https://www.twino.eu/ws/public/user-agreement-stream?lang=en

Nobody is arguing they can't default; even banks can default. The point is 7% interest isn't absurd.

> 7% interest isn't absurd

It does require asking intelligent questions. Like what has been the historic default rate amongst TWINO’s borrowers? Is the borrower quality for recent cohorts higher or lower than for earlier cohorts? How might one enforce their claims in a Latvian court? Cryptocurrency gamblers don’t do this.

If you’re earning 7% in U.S. dollars or Euros and not reading and thoroughly understanding the prospectus, you’re being a chump. (Not making specific claims regarding TWINO. Seven percent may be reasonable compensation for the risk involved. But claiming there is “no risk about performance” is absurd.)

It's not a "past performance isn't indicative of future performance" scenario in any reasonable sense. The loans you buy are already sold and it's fixed rate. You are calling the risk of the whole company defaulting "performance" and that's what I disagree with.

Their highest rated loans (11-13%) are guaranteed by them; that's quite explicit. The end-borrower default-rate is pretty low which is why they can do it.

> The loans you buy are already sold and it's fixed rate

Let's say you buy 100 $100 loans at 7%. You expect to earn back your $10,000 of principal plus $700 of interest. If 10% of your bonds default, you get back $9,000 of principal and $630 of interest. That's a 4% loss on principal.

TWINO advertises it will buy back defaulting loans at face value; if they pay out, you earn $10,700 irrespectively. (I'll ignore that their Terms of Use appear to explicitly refute this guarantee [1].)

But what if they don't pay? Do they have cash on hand to pay if 10% of loans issued through their platform default? What about 50%? (This happened in the financial crisis. People thought they had "no risk about performance" because someone guaranteed their bets.)

This is why understanding the background default rate, whether the credit quality of new borrowers is worse than old borrowers, and TWINO's cash position are important. If the whole company defaults and borrowers default enough, you will underperform (a) expectations, (b) a risk-free security like a U.S. Treasury and (c) even straight cash.

TL; DR TWINO is risky. Why do you think they're selling the loans to you, instead of banks or hedge funds or sophisticated investors?

> You are calling the risk of the whole company defaulting "performance" and that's what I disagree with

See the above. If the company defaults your guarantor vanishes. Now you're directly exposed to the credit of your borrowers. (You'll also have to enforce your claims under Latvian law. Be ready to find and pay a Latvian lawyer.)

[1] https://www.twino.eu/ws/public/user-agreement-stream?lang=en

You are really making this too complicated. Nobody is looking at going after individual borrowers for a few hundred euro - you don't know anything about them except their country and rating.

The risk is not about "performance" but the company being fraudulent or defaulting, in which can you lose everything.

Remember Bernard Madoff?

Edit: Ran a Ponzi scheme (promised 12% p.a.) from the 1970s til 2008. $64.8 billion of damage.

So you're saying that the key to success is to get in at the ground floor, and exit after a few years?

This is commonly referred to as "picking up pennies in front of a steamroller".

So from looking at it twino is unsecured consumer lending? That seems pretty risky.

They charge much higher rates and have a good balance sheet, without much leverage. It’s not likely all their customers default at once, so the risk is lower then most instruments.

>It’s not likely all their customers default at once, so the risk is lower then most instruments.

I mean I would question this. Of course that's true in a good economy but it's not true at all in a bad economy. To invest in this I think you need to ask what actually happens if there is a downturn.

Yep, every Ponzi scheme does this it seems.

> every Ponzi scheme does this

This is what a Ponzi scheme does, in other words, this is the definition of a Ponzi scheme.

That's practically the definition of a pyramid scheme.

Ponzi not Pyramid. Pyramid means that each participant makes their money directly from their downline, in a self-similar way. And a Pyramid scheme can be totally honest, relying eyes-wide-open on the sigmoid curve for its initial success and eventually failure. A Ponzi scheme lies about the source of financial returns.

They're being told to recruit people to "invest" so there is money in the fund that can be taken out before the inevitable crash. The returns they talk about are clearly just numbers they pulled out of their ass. Nobody should give those a second glance. It's all about getting more suckers in there and getting out before they realize they've been suckered.

It is always amazing to me that humans are just so predictably greedy. You'd have thought that we'd have learned any damned thing from history. For other readers with a bit of free time this Friday afternoon, XtraHistory has a great series on the 'South Sea Company' Bubble and the always interesting First British Prime Minister, Robert Walpole: https://www.youtube.com/watch?v=k1kndKWJKB8

I would have stopped at ”ICO”.

Maybe so, but it breaks the HN guidelines to post shallow dismissals whether you're right or not, so would you please not post like this to HN?

https://news.ycombinator.com/newsguidelines.html

Ok, no worries, thanks for the feedback and reminder :)

It's just fascinating to me to see the cryptocurrency world gradually rediscover how financial regulation came to exist in the first place.

The US's capital and commodities markets started out very wild west. Over time, they've become highly regulated. Not because of mean, bad government, but mainly because market participants wanted regulation to drive out bad actors and increase market trust. That high level of ambient trust means that many non-US companies will list on US capital markets. It's a sign they pass more rigorous standards than elsewhere.

As you point out, "ICO" is becoming synonymous with "keep away". I've already seen many cryptocurrency participants lament the decline in brand value. If it hasn't happened already, I'm sure some bright spark will try to put together some sort of "Good Housekeeping seal of approval" for ICO-like vehicles in hopes of salvaging some sort of investor trust.

Although I hope otherwise, I suspect it won't work. Between the rising interest of regulators and the ability of non-scammy businesses to raise funds via more traditional means, I expect the bad will continue to drive out the good. Ponzi himself never really repented; in his last interview before his death, he said, "Even if they never got anything for it, it was cheap at that price. Without malice aforethought, I had given them the best show that was ever staged in their territory since the landing of the Pilgrims! It was easily worth fifteen million bucks to watch me put the thing over."

I suspect the crypto$ world will wind up as history's biggest exploration into NIH Syndrome.

I stopped at the 'C'. Even if you accept that bitcoin has some legitimate worth there is no justification for all the rediculous Coins that pop up constantly. Why do people buy them? Are they trying to collect them all like a young person's version of Franklin Mint?

«no justification for all the rediculous Coins that pop up constantly»

The market certainly agrees with you, this is why the top 5 coins account for the 75% of crypto market cap, valuing the combined value of the hundreds of others at less than 25%.

Sounds as useful as collecting RSA public keys. If you want them all...

No thank you Sir, I'll stick to my collection of GPG public keys.

I've tossed money at a few smaller projects that solve a legitimate need. Projects like Nano, or Kyber, or Loopring. The difference, I think, is that I rarely get in on ICOs, I don't throw any money at it I can't lose, and I think of it less like an investment opportunity and more like an easy way to help tech startups I believe in without having to get directly involved.

That's why I "collect" them. :)

It's fun.

I know this sounds like low-effort snark, but ... yes, I agree.

For whatever else might be wrong or gameable about the stock market, at least IPOs require you to connect your identity as an officer of the company, and take on an obligation to work for shareholders' benefit, so there is a "neck to strangle" if you flout your agreement and run off with the funds. ICOs have no similar mechanism, making them extremely lucrative for scam artists.

Dollar figures in cases like this shouldn't be trusted. ICO scammers have an incentive to make it look like they're getting more investment than they really are, since that gets them more attention. They can easily achieve this through self-dealing--taking their own money and giving it to themselves under another identity. They can even reuse the same money to do this multiple times; that would leave evidence on the blockchain, but I'm not aware of anyone who checks for such things.

And article authors have an incentive to make the numbers as big as possible to attract the most attention. They happily use the highest wild estimate in the title.

I've always assumed that the majority of these shitcoins that come out of nowhere with a copied and pasted whitepaper, then suddenly receive $10M+ in "investment", are just schemes designed to launder cryptocurrency drug/gun/etc profits.

Somebody should look for this. However, it's very easy to launder this money through an exchange to hide the obvious tracks.

At this point you really can feel no sympathy towards anyone who gets suckered into these types of scams. Same thing with facebook scams or instagram/snapchat pyramid schemes. If you really are that nice word for lacking intelligence or any ability to think for yourself, then you deserve what you get in terms of financial loss or social backlash. There isn't even a target demographic for this, people from all over the board are falling victim. From old people with their retirement savings to young adults who spend their minimum wage paychecks on it, all in the hopes of getting a quick turnaround. That's not meant to come off as mean or condescending, you can only say to someone "It's okay, everyone makes mistakes" so many times before you stop feeling pity towards their poor decision making.

A thing to note in my eyes is that different to social media scams, these ICO scams aren't even being that pushy in terms of advertising. When engaged with a pyramid scheme, people tend to be pretty aggressive in getting you to join. With these scam coins, people are willingly going up to them with little to no previous information and dumping their bucket of pennies in the well.

EDIT: Getting down voted for being blunt. Sucks to lose rep because people don't like to hear the truth.

This would be true if it was the same person falling for these ICOs each time... But we're talking about people that haven't seen dozens of scammy ICOs, or even ever heard of pyramid schemes (from other than... pyramid schemes, like Amway does to discredit their critics).

I still feel sympathy for people in this situation. I have met a couple that joined Amway (actually even invited me to one of their "seminars"), and tried very hard to show them how this did not make any economic sense, was a waste of their money and time (that could have been spent building an actual business), and that they were using manipulative techniques to lure people in... to no avail. Brainwashing is hard to counter.

Actually, normal people do deserve protection from financial scams; and they don't deserve what they get just because they are not as sophisticated as a HN reader.

> not as sophisticated as a HN reader

God help us

I don't think it takes a particularly high amount or sophistication to google "ico", see that most of them are scams, and stay away. People shouldn't invest in things they don't understand.

You'd think so but literally no one in my family was able to do this.

You're coming from a place of higher-than-average technical knowledge. Many who do not, especially folks who never learned how to think critically, have no idea how to verify a claim or to verify that something is what it says it is. Many, in fact, take what is said on TV as the "correct" thing and rely on that to help steer their knowledge.

People just see everyone getting stupid rich around them on TV by investing in "crypto" so they obviously would like to do the same thing. But crypto is hard. Even the hard core crypto fans have many blind spots.

For many people, greed, or just having no financial luck in life and being desperate for a way out, are both powerful forces that can pretty much turn off any rational thought.

There are a lot of assumptions in this statement.

1. You assume those people are proficient in English.

2. You assume those people can operate a smartphone or a computer, let alone go search for news.

3. You assume they will immediately discard scammy stories as fake. True story: yesterday, a relative of mine sent me a story about keeping her Facebook's account free by sending a certain SMS to 10 other people in her contact book. It took me 5 minutes to explain to her this was obviously a scam, and yet she wasn't totally convinced, because by her words "a lot of her friends sent her the same SMS".

4. You assume people have financial knowledge about investment or basic understanding of risk and return. Remember, in Vietnam there's no concept of 401k or IRA, and most people never invest before.

5. You assume people have college degree. In fact, many victims didn't finish high school or even middle school. Despite all the news, a large population of Vietnam still lacks college education.

> I don't think it takes a particularly high amount or sophistication to google "ico", see that most of them are scams, and stay away

I did technical due diligence for several investors last summer for ICOs and their "whitepapers" as well as talk to founders of these ICOs themselves about their idea. I successfully steered many away from these frauds, I sadly watched as others didn't.

Hell, I watch one "founder" launch his token right in front of me, yet he "had to care for a sick relative in <HOME COUNTRY>" not two weeks later. I haven't heard of it since, and they haven't updated any of the company marketing material since it's ICO.

> People shouldn't invest in things they don't understand.

I have a rule. Every time I catch myself about to say somebody "should/shouldn't" do something, I ask myself:

"Does my comment materially help prevent this situation from happening again or help the victim seek justice?"

Or,

"Does my comment only show contempt for the victim while not materially improving the situation nor helping the person victimized?"

> Getting down voted for being blunt. Sucks to lose rep because people don't like to hear the truth

I think you're getting downvoted for dehumanizing the people affected by scams. Crypto scams are not the only scams in town. There are tons of them of varying from legal to illegal (MLM, Nigerian Price, etc). Do you not care for the victims of _any_ scams or just specifically for crypto scams?

The common thing in any scam is that there is a victim. Not everyone knows better. In fact, you hear on the news constantly about how bitcoin is huge or some new crypto currency is taking off and people who know absolutely nothing about it want to figure out a way to get into it, not having any idea they are getting scammed. I've had non-techie friends ask me "how do I do this crypto thing? everyone is getting rich from it!".

Having a high and mighty attitude of "you're stupid therefore you deserved it" doesn't progress anything and just shits on the victims. Instead, let's try to figure out ways to create _less_ victims.

>EDIT: Getting down voted for being blunt. Sucks to lose rep because people don't like to hear the truth.

Because it's not the truth, it's just you being a jerk.

It's not one person being scammed over and over. It's people reading about the stupid rates of return we've seen on cryptocurrencies over the last few years, reading about some 19 year old who's now a millionaire overnight, and thinking this might be their way to financial security when they might not have many options.

Considering how these technologies are sold, in almost religious terms, as the inevitable financial future (especially by a certain hacker-themed website) and the people involved are touted as super geniuses, it's not hard to see how people who don't really understand them get pulled in.

I recall a few weeks ago being in a diner and overhearing a conversation between old men where one asks the other if they've heard of Bitcoin and then explaining how he's heard how much money people make off of it. I guess I could point and laugh at them but it's really more sad than anything that people are being sucked into this bubble of hype.

And I had a Lyft driver all interested in bitcoin a couple of months ago. It's easy to laugh at people and call them stupid and greedy especially in retrospect when bitcoin crashes, the ICO scams, or the dot-com stock bombs. But plenty of people have also made out big with those things (maybe not ICOs--except for the scammers) and, as you say, I'm sure it's very tempting for people without a great financial future on the horizon to look at all that money and wonder if they can't maybe grab some of it.

You didn't read it all; this was also a pyramid scheme, only it had a token associated with it.

I'm also skeptical about the $660M number. To put that in perspective, Vietnam's GDP is $232B, so this is about 0.3% of Vietnamese GDP. 0.3% of the US GDP would be about $50 billion.

FWIW most articles I'm finding source the $660M number to the linked Tuoi Tre News story. Their quote is "The victims said the company had conned them out of VND15 trillion (US$660.79 million)." https://tuoitrenews.vn/news/business/20180409/vietnamese-cry...

I have no doubt there was yet another ICO scam with someone walking away with the money, but I wonder how much money it was.

The "investors" (ahem) are no doubt counting their expected returns as the amount they are out, rather than their capital outlay.

I just searched around and there is a fair chance the number might be legit. In the first paragraph of this article [1], it says that the amount in VND is converted from 650MM in USD, taken from the ICO organized by the Modern Tech company.

I think a comparison to the wealth is fairer than to the GDP. There are quite a lot of under-reported revenue streams in Vietnam. It's definitely still a sizable chunk though and any dollar amount assigned to cryptocurrencies should be taken with a big grain of salt but I can definitely see it happening.

[1] https://kinhdoanh.vnexpress.net/tin-tuc/doanh-nghiep/nha-dau...

$660 million across 32,000 people is over 20 grand per person. That seemed a little crazy to me.

That is the legit number. And actually, the scammers built their profiles by leading a lot of winning ICO investing campaigns before that. People just had to follow their investing scheme, put money in their so-called portfolio, and made tons of money from it, so they trust these "experts". Then they claimed iFan and Pincoin were the biggest opportunity. People were so greedy to realise the truth tho.

Maybe they are so good that they were able to get most people of means in Vietnam to invest?

Did it actually raise 660m or was that the size of the "market cap" when it collapsed?

if I sell 100 tokens for a dollar then convince someone to buy 1 token for 10 dollars, if I run off with the money I've not run off with $1000 even if it feels like it for the people left with tokens.

In these situations they sell their bullshit tokens for real money (or BTC/ETH), so they would have run away with the actual money or something within an order of magnitude, not some fantasy "market cap".

It sounds like they pulled the plug after as little as 2-3 months of supposed ~50% monthly increases. So the chance that the real money stolen is somewhere in the vicinity of 1/4 the apparent loss seems high.

Your figure of 1/10 to be conservative sounds sadly sensible.

This is an ICO. The scammers got paid in cold hard cash.

Well yes, but the question is how much?

> Well yes, but the question is how much?

The irony being that the blockchain was intended to answer a question like this....

Where's the smart contract that collected those funds? I'm really skeptical about that $660M number.

Filecoin raised $257M and they had the support of a bunch of VCs, top crypto funds, smart crypto whales, and thousands of supporters around the world.

$660M for a coin no one has heard of? Doesn't add up.

Haven't found the ICO contract, but the ERC20 contract says there are 1,912 token holders while OP says there were 32,000 investors.

https://etherscan.io/token/0xC8a8D2A81cc86b95beb04E5a320D7E5...

Seems like Techcrunch may have regurgitated some alarmist articles without any fact-checking. I'm not finding the evidence either.

There's no way they raised $660M. Even $66M would be pushing it. I hope TechCrunch edits this article with a more accurate number.

Filecoin and Tezos both raised about $200M and were considered massive ICOs, not to mention they happened in the wealthiest countries on earth and were heavily backed by institutional investors. It's simply impossible that an obviously scammy ICO in a relatively poor country raised $660M.

I'm old enough to remember StockGeneration.com [1].

Different decade, different suckers.

[1] https://en.m.wikipedia.org/wiki/Stock_Generation

This is super sad & bad for the space and for those of us that work in the industry and just want to build real stuff.

$600m is a ton for anywhere, but especially for Vietnam! I hope there is an international manhunt ongoing.

I'm sure once that "real stuff" releases it'll replace the speculation and scamming in the news and the forums.

When's that happening by the way? Surely all these billions of dollars that have been poured in cryptocurrencies and "blockchain technology" in the the past years will soon come to fruition, right? I can only hold my breath for so long...

> This is super sad & bad for the space and for those of us that work in the industry and just want to build real stuff.

This is the "real stuff".... it just isn't the techno-futuristic utopia that some hoped it would become. Turns out, blockchain and all the goo floating around on top make an excellent platform for financial fraud and that is about it.

Bitcoin, ICO's, The Blockchain, and everything else running in this space makes it all a world-class platform for running classic scams with a modern twist.

Man if only we had regulation! Oh wait

https://twitter.com/stephendpalley/status/982353358915801088

There is another one going around in Vietnam called Polynetwork which is a clear scam: https://polynetwork.org/

Looks like it was always going down from the initial offering and the price now is basically 0 https://coinmarketcap.com/currencies/poly-ai/

> raising $660 million from approximately 32,000 people.

Honestly where is this money coming from? Is there just that much money sloshing around in the world chasing after these harebrained ideas?

> Is there just that much money sloshing around in the world chasing after these harebrained ideas?

No, it's probably based off market cap. Let's say I generate 100B tokens. I happen to con you into buying one for $0.01. Boom, the price of my token is $0.01 per coin, and I have 99,999,999,999 of them at a market cap of $1B. Only $0.01 of actual value has been exchanged, but I can now "exit scam" with $1B in supposed value.

In reality, they probably had a few million, maybe tens of millions at most. $660M is a ridiculous number, probably only achieved by factoring their stupid coin's market cap in.

I don’t understand how we have all this information on the internet and people still get sucked into these scams. 48%...that is not a realistic guaranteed return! :/

Because the pro-scam information surfaces easier than the anti-scam information?

Watch one ponzi scam video on Youtube and the algorithms will start showing you others ...

This is an interesting phenomenon in general.

It's something the major social network sites are going to have to wrangle with. Someone who expresses even a tiny interest in conspiracy theories or extremist views gets pushed progressively deeper into that rabbit hole over time.

The problem with conspiracy theories is that we have no shortage of well-documented, actual, real conspiracies - alongside bullshit about how George Bush was a reptilian from the planet Xoros.

The former absolutely need to be talked about...

Depends a bit on your susceptibility to believe such things in the first place. If you're a little sceptical of some foreign policy incident and YouTube keeps surfacing the works of Alex Jones and David Icke as possible answers to the questions you've just seen a compelling video ask, there's a good chance it'll make you less questioning of the mainstream in future.

I've heard lots of coverage and excitement for Bitcoin et al on the radio, TV, etc - however they oddly never mention or talk about the Pyramid-Ponzi scheme, they never have an 'expert' on to counter the hype.

Obviously there are more people incentivized to talk positively about these incentivized crypto-assets (assuming they own crypto-assets structured as Pyramid-Ponzi schemes), so they learn and get good talking about the hype and talk about the "positives."

The reason these are more powerful than say a single stock broker running a Ponzi scheme, is that you have all of these unrelated, decentralized and people that are global that are indirectly collaborating. It's why it's so much more dangerous as well. It's continued in part for so long too, because with a stock broker, you arrest/charge the stock broker. With incentivized crypto-assets, you have a lot of different parties/systems that must work together, indirectly, for it to act like the Pyramid-Ponzi schemes that they are.

This being convoluted like it is seems to be causing regulators and enforcement to lock up -- along with all of the people and organizations actively lobbying to "educate" regulators around the world with the version and whitewashing to see how they can try to fiddle their way to fit within the laws countering this kind of pattern. Or maybe they're being bribed with "$1,000,000" worth of "Bitcoins" (per year?) that they're promised will become worth 10-100x within 10-20 years.

The solution is a crypto-asset that isn't incentivized, that is government mandated, and that CONVERTS their fiat currency into the crypto-asset -- not simply exchanging it, e.g. the "paper" currency gets destroyed, instead of given to the seller.

With incentivized crypto-assets, the cost of the future value is transferred to the future holders - and even though it may be subtle, it will become a very substantial amount; it already is a substantial amount that's been transferred, however there's a bigger base of holders now who want to at minimum get the money back they bought them for - and so becomes the marketing force behind it all, disregarding or ignorant of the negatives for society as a whole.

Edit: To add, can there be incentivized crypto-assets that are structured to be legitimate? It seems the angle that is being taken to legitimize this structure is that they perhaps mimic the structure of stocks on a stock market, however one major difference is that stocks on the stock market aren't used a transactional layer - and therefore don't have (hopefully) under or uneducated people making the trades/purchases; the whole purpose of these incentivized crypto-asset blockchains is of course to get general consumers/the masses a.k.a. highly likely under educated people buying/using them for their platforms as a transactional layer; people could otherwise simply pay fiat currency for access to identical services, without them adopting/vesting into these Pyramid-Ponzi scheme structures though (all who should be being educated that others must adopt/use the service in order to maintain the value for their crypto-asset; however is that education then too close to admitting it's a Ponzi-Pyramid scheme?). There are more differences than this example.

If we define "pyramid-Ponzi scheme" is that the value goes up if more people talk about and buy it, then every asset is a pyramid-Ponzi scheme. Startup shares, lottery tickets, stocks, US dollars, oranges, everything.

It's not a very useful definition.

10-15 years ago, I was certain that "bullshitting" people was going to disappear in the near future. It seemed inevitable that people would just pull out their phone and fact check any scam or lie. In a bizarre twist, it appears the opposite has happened.

Yeah... with 1000 conflicting versions of any event, it's more difficult than ever to sift through the misinformation. Then one brilliant soul will say "aha, I know the solution, I will hire experts and engineers to efficiently sift through information sources and present people with a version of truth we can be confident about!", behold the birth of the 1001st version of events.

Fact-checking is more convenient now, but there's still no antidote for a lie someone wants to believe.

If you can put information in someones eyes, you can bullshit them.

That only costs money in 2018.

I think most people know that these things are basically digital pyramid schemes, but they think they're getting in at the top and will be smarter than the other suckers and will get out before it collapses.

This is also why they collapse so fast. It's basically a race to not be left holding the bag.

That's assuming that the truth will simmer up to the top and rise above the push marketing. Also on reddit there are entire subreddits that seem to be conducive to luring people in and performing pump and dump schemes, mixed in with legitimate posts.

It's likely because they see of Bitcoin, Ethereum's Ether et al - that are also structured as Pyramid-Ponzi schemes, incentivized crypto-assets - and they see their success and figure they have a chance riding to the top in the next one that gains momentum or goes mainstream.

Bitcoin et al of course don't outright make claims of returns. Their communities with vested interest have gained enough size and attention that they gained traction in mainstream media, and that community has been "smart"/clever enough to not outright market it as a Ponzi scheme - where they whitewash with marketing hype for anything but, and where they rally to "HODL" when the crypto-assets they own are either a) on a downtrend (to help reduce a massive sell off), and b) at highs (to avoid a massive sell off) - all of which to show how illiquid these crypto-assets are; https://hackernoon.com/analyzing-every-reddit-comment-mentio... - a blog post by a company who allows bot-based buying/selling based on these HODL patterns...

There will be other tricks this organized community are surely doing now, like aligning big buyers with big sellers, so the value won't tank when someone wants to buy $100MM+ worth of the crypto-asset; all of which will lead to the perception of it not being so volatile.

This is the best wolf-dressed-in-sheep-costume that's ever come into existence.

I believe non-incentivized crypto-assets will win out in the end anyways - that is if blockchain is even a necessary part of a solution - as incentivized crypto-asset structures will cost society more (in the short term and long-term, anyone who "buys in" past a tipping point anyway), and so platforms that compete with incentivized crypto-asset powered platforms simply have to educate users/market to compete with how their wealth will be unreasonably/unnecessarily reallocated weighted towards the earlier adopters.

It's mostly people looking at how Bitcoin et al went up exponentially last fall, fueling FOMO heavily. "What if I had..."

But then instead of buying Bitcoin who has 9 years of storing value, they buy a shitcoin.

> But then instead of buying Bitcoin who has 9 years of storing value, they buy a shitcoin

Most of them are running the exact same codebase as Bitcoin with a few tweaks. How are they any less of a "shitcoin" than Bitcoin?

Well, 8 years of storing value and 1 year of collapsing value, eh?

Because normally there are regulations in place when dealing with USD that protect these people.

Nah, these people knew damn well what they were doing.

They knew it was a high high risk cryptocurrency. Its like instead of buying 10,000$ of stock, these people bought 10,000$ of lottery tickets.

The horrible part is that on /r/cryptocurrency is that people still have this mentality.

That would imply that no one actually believed in their marketing. A lottery ticket does not tell you of guaranteed earnings.

Again we find that the current, unregulated, ICO market is the most interesting system for parting fools from their money in recent history.

Jokes apart, I think it's a good thing. It's 2018, if people are exposed to that kind of scam today, they will evolve quickly, especially the kids. They will develop critical thinking and bullshit detectors. They will stop believing in advertisement and, more importantly, propaganda.

And hopefully remember why we have things like the SEC and securities regulation.

Yup, this is a natural market correction of stupidity. We need more idiots to get bit, not to protect them from themselves. "Capitalism without bankruptcy is like religion without hell."

Classic pyramid scheme, I think 660mil in Viet currency?

No, that's less than $30k. The article says USD.

>> "Investors have been told that they would enjoy a profit rate of 48 percent a month from their initial investment, and recoup all investments after four months. People would also be rewarded with an eight percent commission for every new member they have introduced to the network."

Scammers don't deserve the money but fools and their money...

"You can't con an honest person" (Not actually always true, but applies to many scenarios)

How is this different then Bitconnect or any of the other 100's of ICO scams that have happened in the last year?

It's not that ICOs are bad, it's that there are people naive enough to believe this kind of shit.

Can anyone help ? I have been trying to find a site that was submitted to HN a week or two ago. It was a fake site about a blockchain scheme but the author's intention was to highlight the shortcomings. It was before 1st april.

Thanks :).

I'm especially dismayed that they brought the Ethereum name into it.

Ethereum already gets a bad rap because it's easy to write insecure smart contracts, if someone uses the platform to pull off a scam that's even worse.

I doubt they even created a dapp or wrote any code though.

Maybe Ethereum is stupid for encouraging "tokens" in the first place, and maybe their name should be dragged through the mud.

People buying cryptocurrencies are NOT investors. Period.

I like that we’ve just come to accept daily occurences of billion dollar ponzi schemes as a cost of doing business. This is great. You crypto people should be proud of yourselves.

The story is unbelievable on many levels.

Initial. Clown. Outwitting.

Given how often things like this have been happening, it’s no longer “initial,” it’s iterative.

Iterative Con Opportunity

I tried warning people that 99% of alt coins die.

They rather believe in unicorns.

> I tried warning people that 99% of alt coins die.

I love this logic. Everything but Bitcoin is somehow a shitcoin. Maybe, just maybe, Bitcoin belongs in the same stack as all the rest...

I did think that some alt coins would survive, but then again I'd rather trade in fewer.

Greed is a motherfucker.

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