The future of raising finance - a new opportunity to commit fraud: a review of initial coin offering (ICOs) scams

Milind Tiwari, Adrian Gepp, Kuldeep Kumar

Research output: Contribution to journalArticleResearchpeer-review

23 Citations (Scopus)
559 Downloads (Pure)


Over one billion US dollars were invested in blockchain in 2016. The potential application of blockchain extends far beyond cryptocurrencies. One use of blockchain is an Initial Coin Offering (ICO), a digital method of raising finance involving issuance of tokens in exchange for cryptocurrencies or fiat money. It is a cheaper, easier and quicker way to raise funds compared with traditional public offerings. However, it has raised a new opportunity for fraud. An estimated 10% of ICO funds have been lost to fraud. Using case-study analysis, this study determines characteristics of such fraud schemes and the regulatory changes made in response to them. The study reveals key lessons for investors in terms of proactive steps that can be taken to protect themselves from being victims, for issuers to ensure awareness and take steps to secure investors’ trust, and for regulators to promote a safe environment. To the best of our knowledge, this study is the first to document the effect of ICO fraud schemes on the regulatory environment, which is going through a series of amendments to provide protection against such fraudulent schemes. Additionally, it provides direction for future research to further investigate the risks of this new method of raising funds.

Original languageEnglish
Pages (from-to)417-441
Number of pages25
JournalCrime, Law and Social Change
Issue number4
Early online date23 Nov 2019
Publication statusPublished - 1 May 2020


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