Unfortunately, investors also are not aware that initial coin offerings may be taking advantage of their novelty to quietly evade federal and state regulatory systems that are designed to protect investors from fraud.
In many instances, purchasers of coins in a new ICO receive nothing in exchange for their contributions but the promoter’s promise to build some online service for which the coin will be the accepted currency. But so far, most of these services are still not up and running.
When a promoter abandons the project or simply fails to complete it, the investor’s entire financial contribution is in jeopardy. There is risk in all investments, but an investment that dodges regulatory oversight destroys the level playing field between promoter and investor by stripping investors of legal protections.
