A cryptocurrency start-up that raised nearly $375,000 through an initial coin offering (ICO) has disappeared with the funds with nobody able to track the founders down.
Confido billed itself as a company that is developing so-called “smart contracts” to act as an escrow between a buyer and seller during a transaction of some sort.
Traditional escrows would be held by a third party. But smart contracts are supposed to be fulfilled when both sides meet certain conditions, removing the need for that third party.
The ICO took place earlier this month through a platform called TokenLot that facilitates the fund raising. Nearly $375,000 was raised. Investors were given contract for differences (CFD) tokens.
These tokens traded as much as $1.20 on November 14, but plunged following the disappearance of the Confido team to around $0.02, according to data from Coinmarketcap.com.
In the past few days, in what is being dubbed an “exit scam,” online assets related to the Confido founders and the company have been deleted. The firm’s website, Twitter account and Facebook page were erased.
However, a cached version of the company’s Medium post that was put online on Sunday still remains. In the post, the Confido team said that it is in a “tight spot” due to “legal trouble” with a contract.
“We signed the contract with assurance from our legal advisor that there was minimal risk and it would not be an issue. I can’t and won’t go into details, but he was wrong. It is a problem,” the post, on publishing platform Medium, says.
It was authored by Joost van Doorn, the CEO of Confido, but there is no trace of him online. A description of van Doorn on the cached version of Confido’s website says that he has a masters degree in international business and has worked at firms such as eBay, PepsiCo and Zalando.
CNBC has reached out to all three companies to see if they can verify van Doorn’s claim.
A person on Reddit who posted under the name “Chris-ConfidoSupport” claimed Monday to be a representative of Confido, and said he has “absolutely no idea what has happened.” The Redditor claimed to have been in contact with van Doorn for a “number of weeks” and this latest move is “completely out of character.”
Many people on Reddit questioned the credibility of the post and whether the person had actually met the CEO.
An ICO is the latest way for cryptocurrency start-ups to raise money by issuing their own digital tokens in exchange for a virtual currency like ether or bitcoin. Investors don’t get a stake in the company, but the tokens they receive can be traded or used on a service provided by the platform. ICOs have exploded with more than $3.55 billion raised via this method so far this year.
On Monday, TokenLot, the firm that hosted the ICO, put out a statement that said the Confido team had “pulled an exit scam.”
The Medium post said that TokenLot’s lines of communication with the cryptocurrency company had been closed and it doesn’t have any more information outside what has been public. It said that Confido had shown all the required proof needed to list its ICO on the platform.
However, TokenLot said that it was looking for clues to track down the Confido team. Some of the ether tokens collected during the ICO had been sent to an account held with Bittrex, a cryptocurrency exchange, it said.
TokenLot added that it had been in contact with Bittrex and that it had confirmed the account that the ether was sent to was an account where a “know your customer” check was authenticated. This is a process that is used to verify people are who they say they are online.
CNBC has reached out to Bittrex via Twitter for more information but is yet to hear back.
TokenLot also said it had reached out to KuCoin, a Chinese exchange that listed the CFD token issued by Confido. Some people took to Reddit to slam KuCoin for not vetting the company properly.
A spokesperson for KuCoin told CNBC on Tuesday: “In order to protect the interests of investors, Kucoin has suspended trading of CFD and are actively seeking contact with the CFD team. We have also started to implement an emergency loss prevention program to help reduce the losses of CFD token investors.”
“If the Kucoin team is unable to contact the CFD team shortly, and re-enable normal trading, the final decision on trading stoppage will be made in a follow-up announcement on the website.”
ICOs are currently unregulated in the majority of the world and completely banned in China and South Korea. This means that investors do not have any protection should an event like this take place.
But many regulators are beginning to look into ICOs and trying to figure out how to deal with their rice. Authorities in Abu Dhabi recently released rules to bring ICOs into the regulatory fold.
However, a number of people in the cryptocurrency and technology world have poured cold water over ICOs.
Brad Garlinghouse, CEO of Ripple, the fourth-largest cryptocurrency by value, told CNBC in a recent interview that “a lot of what’s happening in the ICO market is actually fraud.” Ethereum co-founder Joseph Lubin told CNBC that there is “irrational exuberance” in the ICO market, although he believes the technology will mature and is here to stay.
Source: Tech CNBC
A cryptocurrency start-up disappeared with 5,000 from an ICO and nobody can find them