Jordan Belfort—a former stockbroker portrayed by Leonardo DiCaprio in The Wolf of Wall Street—called initial coin offerings, or ICOs, “the biggest scam over.”
“It is the biggest scam ever, such a huge gigantic scam that’s going to blow up in so many people’s faces. It’s far worse than anything I was ever doing,” said Belfort, according to a report in the Financial Times.
Belfort spent 22 months in jail after pleading guilty to securities fraud and money laundering and is now promoting a book about closing sales called Way of the Wolf.
“Promoters [of ICOs] are perpetuating a massive scam of the highest order on everyone,” he said. “Probably 85 percent of people out there don’t have bad intentions, but the problem is, if five or 10 per cent are trying to scam you, it’s a f**king disaster.”
He went on to add that the techniques used by ICO salespeople seem to be similar to the “pump and dump” tactics used by boiler-rooms, which includes getting supply, promoting aggressively, leaking a little into the market, and then selling the rest before the price collapses.
“Everyone and their grandmother wants to jump in right now,” he said. “I’m not saying there’s something wrong with the idea of cryptocurrencies, or even tulip bulbs. It’s the people who will then get involved and bastardize the idea.”
An ICO is a fundraising method where a company attracts investors looking for the next big cryptocurrency score by releasing a currency in exchange, typically, for bitcoin. So far this year, 202 ICOs have raised more than $3 billion, according to Coinschedule.com.
Belfort isn’t the only naysayer. Last month, China banned ICOs, citing how it has “disrupted the economic and financial order.” And seven government administrations said jointly that the ICO exists as an unauthorized fundraising effort that may be tied to scams.