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Comment by 1ba9115454 | Hacker News Reader

Most of the new offerings are tokens. A whitepaper will list the benefits to the user, usually a % of profits of some new product that the team will bring to the market. So they are acting as company shares.

I'm not trying to justify this and I don't buy them myself, but I am watching teams raise serious amounts of cash.

To me this seems an easier way to raise cash than going to a bunch of VC's becuase with the ICO craze the due diligince is negligable.

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Defrauding people is definitely easier than building a legitimate business.

how do you defraud people by doing an ICO? if you raise the cash and don't attempt to build a business, you will be caught for fraud and go to jail. It doesn't seem like a great vehicle for fraud

I think a lot of new precedents would need to be set to get a fraud conviction over an ICO. People trade Ether for tokens, not money. So they paid money for ETH, and got the ETH as promised. They traded ETH for SHT and got SHT as promised. Are these ICOs making any contractual promises that ownership of SHT gives holders certain rights, or obligates the team to do work? Because if I was doing an ICO, I sure as hell would not do that.

The SEC statement on this was “Buyer Beware.”

Interestingly, the SEC charged two ICOs with violations of securities laws this very day! This is a first as far as I know, and makes clear that the SEC is able and willing to regulate ICOs as securities if they meet certain criteria:

http://consumer.findlaw.com/securities-law/what-is-the-howey...

Read the terms of some of these ICOs. There are soooo many weasel clauses that they essentially say you're buying tulip bulbs that'll probably have no use and no value.

weazel clauses do not save you from fraud. Meaning just cause you put up a bunch of clauses, that doesn't mean you are then free and clear to commit fraud.

They can though. Some of 'em literally say they have absolutely no obligation to actually develop the thing they are saying they are going to develope.

Lots of people do it.

Lots? Name one ico over $1m that has run off with others money?

Plenty of raisings based on spurious concepts but yet to see one actually go full scam, essentially these people have bs programming jobs for a few years until they admit their product is not desirable to anyone.

Most will fail, but at the very least the world will get some open source software from it.

More than could be said for all the dodgy mining explorers I've invested in.

do what? I mean it's one thing to defraud someone and disappear, but in the case of ICO, you put your name out there - there is no escape.

You then pay yourself salary for the next three years, as well as a generous contract to your uncle Bob's consulting firm, which is supposed to build the product.

Sometime in 2020, you post about your incredible journey on your blog, say that all the money has been spent, and the project failed. Whoops, sorry guys.

At least, that's a legal way to take ICO money and run. It's not even fraud if you put some effort into delivering on what you promise.

>>You then pay yourself salary for the next three years, as well as a generous contract to your uncle Bob's consulting firm, which is supposed to build the product.

That's still fraud, and could invite a criminal investigation and result in a criminal conviction. You could bet on the government not enforcing the laws, but that equally applies if token sales are banned.

hmmm. then you face a massive class action lawsuit that finds an email or two where you joke about an ICO with friends, you easily spend 20-30 million defending yourself, you win, but you go bankrupt in the process. No, that doesn't work

Except that won't happen.

why not?

In order to bring the suit in the first place, you have to have some kind of reason to believe that they defrauded you. That they weren't able to achieve their goal isn't good enough.

I am sure attorneys will find a good reason.

I am not. And I am sure they will not want to waste time with a goose chase.

Remember, in this scenario, you don't really have any knowledge or suspicion that they are just ripping you off.

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