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IEO IDAX Scam – another worm, another can? Does it matter?


It’s not new. The issue unearthed by what has apparently happened to the CMA project that had IEO on exchange is a bit of a Deja vu. Is it high time we paid heed?

So imagine you are raising money for a new and exciting crypto project. You go to an exchange that kind of asks consent to update the IEO (Initial Exchange Offering) progress bar with the avowed explanation of leveraging some FOMO current. You are too lazy or ignorant to do some due diligence or too naïve to not blindly trust the exchange. There is some champagne bubbly announcement saying 95 per cent of the fundraising goal is met. But when you turn to the exchange it says only a tiny fraction of the huge claimed sum (which happens to be less than the money you paid them) is achieved. Can you now explain anyone about that 95 per cent pom-pom moment? Can you get any money? Well, your guess is as good as ours.

Yes. Media reports are dotted with two words yet again: IEO and scam. We know – IEO was supposed to be solving just what ICO (Initial Coin Offering) threw on to the fan. But, alas.

Another scam allegation cements the fears around IEO scams. A blog post reveals a new twist.

Crypto Market Ads (CMA) claims that its IEO was cancelled by “because we do not agree on their terms (they called us hours before IEO, we have voice call recordings). They wanted to simulate all the sales in 1 hour time!” It failed in getting a refund and the IEO, which was simulated by wherein CMA said: “it did not raise funds OR the funds raised were taken by because it saw only 2 ETH in our account!”

There are even worries about scammer exchanges and not-so-transparent transparency alliances. As per the alleged concern, “ is simulating investments for IEO projects — basically, they raise anywhere from a few hundred to a few thousand dollars. IDAX simulates that project’s raise millions of dollars in an hour or two to attract new startups and scam them.”

So Coinatory turned to Oleg Martinuk from CryptoMarketAds and asked how significant and worrisome the situation actually is – especially when we consider the simulation aspect. Oleg lets on that – “They just call founders of projects in last day before IEO. Ask to stimulate sales. This happens like this: IEO launches, then number keep growing, but money in project account not. Till it is sold out in 1 Hour. This is done to show new projects that IDAX sell out fast and they are successful. They get a new victim then and it repeats.”

He shares how he got the testimony of one company who did trading listing with them, paid 8 BTC, in the end, found out they have to wash trade their own tokens! “So it’s not only about IEO.”

Fake IEO Scams can be as much as 87 per cent of the total numbers, surmises Siddharth Sogani, Founder, CEO, CREBACO. “The covert presence of hackers and conmen as community members on Telegram and other channels of many exchanges is a concern too. It is easy to sneak in when there are thousands of community people. Better support channels paid services and authorised avenues – those can be emphasised now that we have seen how easy it is to stay unnoticed among a big group.”

The ease and greed that scammers now have all up for grabs – that can hairball into serious monsters for the crypto industry which is already battling a slew of credibility issues. It puts exchanges in a new spotlight – more like deer-in-the-headlights.

Exchanges or Egg shells?

Yes, echoes Oleg. “For sure, tons of people in this industry are freeloaders. This is not a good image for hard working people outside crypto.” Such incidents bring us back to the slippery spot of regulation and crypto – between Scylla and Charybdis.

How do we self-regulate enough so that we can rein in fraudsters and freeloaders? How critical is the need, now, for solid bodies covering standards and some common industry code of conduct?

Regulations are needed, Oleg avers but adds that it must not be expensive for startups to join crypto. “Because what our vision at CMA is, crypto can change the field of startups if there is support from governments and everything is democratic. “

Senior Analyst Wayne Zhao, from TokenInsight, also underlines that we need a reasonable regulatory framework. “At present, this is missing in the industry, especially between different countries and regions. We need to educate users, in the face of an emerging market, when the supporting facilities are not complete, the user’s own risk control capabilities are critical.”

Zhao also points out the need for more third-party organisations. “We need institutions (Like TokenInsight) to provide market information objectively, help eliminate information asymmetry and discover scams.

Sogani reminds about the dire need for bodies that can assess and certify as well as the role of self-regulation in mitigating scams. ” CREBACO is trying to fill that gap. We have bots and knowledge mechanisms to figure out fake trade volumes. It is important to certify exchanges because the market needs some avenue of trust and rigour now.”

It is hard to avoid scams though. No wonder IEOs are being labelled as silent scams. No wonder that if a project does not sell like hot cakes the second it opens, it is looked upon with frown and scepticism.

“Scammers are very smart, they even can spoof email of any legit company and send offers from that email to new victim. As long as people will want easy money, there will be a scam going on. So the only way is to do deals through escrow of the third party.” Oleg dismisses any quick fixes expected here.

“ actually is one of the solutions for this problem, we have a democratic marketplace for crypto marketing and other crypto services (also exchange listings). Only, the escrow system can help you avoid scam and it is part of our platform.”

Shark Tanks Missing

Speaking of scammers and scams, we have not even started talking about badly-run teams or projects that do not go through any quality checks, because hey, who actually cares out there!

As to exchanges, Oleg strongly opines that they must be decentralised. “No other way. Though, as long as there are huge profits, it will not happen so soon.”

Sogani, too, had earlier argued that Decentralised Exchanges (DEXs) are fantastic as they complement the very foundation of the currency’s model: decentralization. “In many Centralised Exchanges (CEXs), you may not know what is being done with the money once the amount is in the exchange.” But he had also contended that the ‘complicated to use’ nature of DEXs needs to be addressed.

Stop playing Pinata

For now, the overall lesson is clear. Oleg reminds. “In crypto, the scam can be at any size, even with ‘legit looking’ companies. So if you want to work with someone, you should do 100 per cent check if claims are real, can be verified.”

No moat, no life belt like some patient due-diligence. The thumb rule applies for innovators and investors both – hitch-hike with care.

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