The Wolf of Wall Street Thinks Some ICOs Are ‘The Biggest Scam Ever’

October 23, 2017, 8:44 AM UTC

In the chorus of voices warning against the fraudulent implications of many initial coin offerings (ICOs), here’s one that should stand out: that of convicted fraudster Jordan Belfort.

The “Wolf of Wall Street,” whose securities frauds were recounted in the film of the same name—where Belfort was portrayed by Leonardo DiCaprio—told the Financial Times that ICOs were “the biggest scam ever” and that they would “blow up [in investors’] faces.”

An ICO is a form of fundraising for startups, usually in the blockchain space, that gives investors tokens instead of shares. However, many of these startups do not have clear business plans. And while investors might hope that their tokens appreciate in value, as those in the bitcoin and Ethereum networks have done, that may not happen.

China famously banned ICOs, lumping them in with pyramid schemes. Canadian regulators have said that these token are securities that should be regulated. The U.S. Securities and Exchange Commission (SEC) has warned of pump-and-dump schemes, where companies don’t deliver the promised goods and cash out following a frenzied ICO.

By some measurements, ICOs have raised over $3 billion so far this year. And Belfort thinks their promoters are “perpetuating a massive scam of the highest order on everyone. “Probably 85% of people out there don’t have bad intentions, but the problem is, if 5% or 10% are trying to scam you, it’s a f**king disaster,” he told the FT.

“It is the biggest scam ever, such a huge gigantic scam that’s going to blow up in so many people’s faces,” he said, adding: “It’s far worse than anything I was ever doing.”

However, unlike the likes of Jamie Dimon, Belfort said there was nothing inherently wrong with the idea of cryptocurrencies.