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ICOs increasingly targeted by cyber-thieves

(Image credit: Image Credit: Zapp2Photo / Shutterstock)

A significant amount of funds raised through ICOs are being either lost or stolen by criminals, experts have warned.

Analysis of 372 Initial Coin Offerings, or ICOs, which had raised a total of $3.7 billion, found that around a tenth of this, or $400 million, had been lost, according to Ernst & Young.

The most common way that funds were taken was through phishing attacks, the firm's report claims, with malicious actors getting their hands on $1.5 million in ICO proceeds a month.

The newer ICOs are having more trouble reaching their targets, and global innovation leader for blockchain technology at Ernst & Young, Paul Brody, thinks the quality of these projects is what’s behind the failure.

“The volume just exploded, people raised their fundraising goals and the quality just dropped,” Brody said in an interview. “We were shocked by the quality of some of the white papers, we see clear coding errors and we see conflicts of interest between the companies issuing tokens and the community of token holders.”

The value of the tokens that get issued during ICOs are sometimes driven by FOMO, or Fear of Missing Out, and often are not linked to project development.

Some also see ICOs as a platform for scamming people, which is why South Korea and China have already banned the practice. In the States, for example, there have been multiple accusations of fraud.

Image Credit: Zapp2Photo / Shutterstock

Sead is a freelance journalist with more than 15 years of experience in writing various types of content, from blogs, whitepapers, and reviews to ebooks, and many more, across sites including Al Jazeera Balkans, TechRadar Pro, IT Pro Portal, and CryptoNews.