A recent ICO which offered ownership in tea sales of a particular kind to the investors has been outed as a scam. The ICO did not have the stocks that they advertised and regularly cooked up and served numbers. They were calling it Pu’er tokens, after the brand of tea that they claimed to tokenize.
The Pu’er team defrauded a total of 3,000 Chinese investors and the sum of amount swindled was roughly $47 million.
The key takeaways from this scam were:
With up to 50–60% tokens locked up in company reserves under one name or the other, and another 10–20% tokens allocated to private investors, the actual number of tokens held by the general crypto-public comes to around 10–15%.
This allows the potential to swing the market price. For example, when a coin gets listed, the bounty hunters tend to cash out by selling their tokens. To counter this, the ICO company puts in their own money to buy the tokens and create artificial scarcity. Also, this transfers another 2–5% ownership of the tokens to the company.Next, they indulge in circular trading and make money by scalping newbie traders.
4. There are always newbie traders who will be parted from their money — There is a reason why FOMO is a word in the crypto-verse. My aunt bought bitcoin in November 2017. She was probably the happiest woman on earth on December 9th. Today, she’s only 33% happy. She never cashed out. Apparently, she didn’t know how to buy/sell on an exchange. She had bought it from a local dealer. Of course, my aunt won’t invest in altcoins but someone’s aunt will, and there a plenty of aunts and uncles in this world.
5. Alphas, Betas, and Proof-of-Concept cannot prevent a scam — With the rising tide in favour of STOs, it is an asset which will be tokenised. Such asset tokenisations and asset-adjacent tokenisations have minimal requirements for creating the alpha/beta version to placate the investors.
In sum, the Pu’er scam has been another learning opportunity for ICO consultants and ICO investors alike.
There are no hard and fast rules which can deem a project trustworthy or otherwise. The lack of clear government oversight takes its toll and emboldens scamsters.
There is only one way to ascertain the credibility of any investment you consider and that is what has existed since the beginning of investing — Do your Due Diligence. Instead of looking for reasons to invest, look for reason why you should not invest.
Source: kayf.ga
If this list is not more than 3 reason, you should be fine, since no one’s perfect.
I’m sharing my little guide to investing which was co-developed with several admins of crypto-pools (a crypto-pool is a group of telegram users that invest together in sums higher than 500 ETH). It has only five bullet points and that is all you need to verify the credibility of the ICO:
Just ask yourself these questions and you can save $100 which is the cost of a lecture that teaches you the same thing on udemy.