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ICOs Rake In Assets, Yet Lack Contractual SafeguardsICOs Rake In Assets, Yet Lack Contractual Safeguards

Penn Law School review of 2017’s 50 largest ICOs by amount raised found significant discrepancies between ICO code and the “contractual promises” made by ICO promoters.

Samuel Steinberger, Senior Technology Editor

July 23, 2018

1 Min Read
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Crypto Initial Coin Offerings have been big business since 2017, raising $20 billion according to Autonomous Next. And that’s just the ICOs that have brought in $1 million or more. Although there’s been a slowdown in the number of ICO entities this year, assets are still increasing.

But an uptick in crypto assets might mean a greater opportunity for fraud. A University of Pennsylvania Law School’s review of 2017’s 50 largest ICOs by amount raised found significant discrepancies between the ICO code of conduct and the “contractual promises” made by ICO promoters.

Only about 20 percent of ICO codes matched what was promised, in their entirety, according to the study. “In a financial ecosystem built around the proposition that regulation is unnecessary because code is the final guarantee of performance,” said David Hoffman, law professor and one of the report’s authors, “... often ICOs are not embedding the governance promises they make.”

The “nebulous contractual relationship” between promoters and buyers of tokens leaves buyers vulnerable. “At least some popular ICOs have retained the power to modify their currency’s rights, but have failed to disclose that ability to investors in plain language,” added Hoffman. 

Buyer beware.

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About the Author

Samuel Steinberger

Senior Technology Editor, WealthManagement.com

Samuel Steinberger is Senior Technology Editor for Informa Connect’s WealthManagement.com. In his role, Mr. Steinberger provides the publication’s wealth and financial technology coverage. 

Mr. Steinberger’s editorial insight and familiarity with technology accelerates Informa’s growth within the financial advisor and wealth management communities, providing in-depth news for advisors and financial professionals. 

Before joining Informa Connect, Mr. Steinberger produced documentaries with former CNN anchor Soledad O’Brien at Soledad O’Brien Productions (formerly Starfish Media Group). He specialized in research, shooting and editing, as well as finding distinct voices to explain topics like mental health, poverty and racial divide. 

Prior to joining Soledad O’Brien Productions, Mr. Steinberger managed multi-departmental technology projects for global legal technology leader Transperfect Legal Solutions. After obtaining his graduate degree in journalism from Columbia University, he completed his transition from technology management to media. 

Mr. Steinberger is an award-winning journalist, author and researcher who has written, edited and reported for a number of publications, including The New York Times, Financial PlanningAmerican Banker and PBS. He is founder of beverages publication Give Me Weird Drinks

Mr. Steinberger’s technology analysis and insight has been featured in several books on virtual and augmented reality. Mr. Steinberger has received awards and recognition for his reporting and research, including the American Business Media's prestigious Jesse H. Neal Award for editorial excellence.

Follow on Twitter: @slsteinberger