Scammers appear to have made off with more than $2 million in cryptocurrency after carrying out an apparent fake initial coin offering (ICO), and the individuals linked to the incident may be connected to another recent theft, CNBC has learned.
A bad actor or actors used a fake LinkedIn profile and copied pictures from another user’s Instagram to create a false persona — and successfully drew more than 1,000 investors into the ICO project, which was called Giza.
The Wild West world of ICOs
An initial coin offering or ICO is a way for start-ups to crowd-fund investment. Instead of raising cash from venture capitalists, a company can hold an ICO, which allows people to invest a cryptocurrency, such as ethereum or bitcoin, in exchange for a new token that’s issued by the start-up. The new digital coin is not equity. Instead, it can be used in exchange for future services offered by the company. It’s also possible that the new coin may climb to a much higher value than the initial investment.
There is big money in ICOs, and they are largely unregulated. Last year, companies raised $3.8 billion via ICOs, and this year alone they have already raised $2.8 billion, according to data from CoinSchedule, a site which tracks the activity in the space.
But ICOs are unregulated in most countries, meaning investors don’t have the protections that they enjoy with other assets such as stocks. However regulators are keeping a closer eye on ICO activity, amid a rising number of reports of scams.
What happened with Giza?
Investors who spoke to CNBC all described a common experience with the ICO in question: They thought the project was legitimate until warning signs began to appear, including a falling out with the company’s sole supplier, a lack of correspondence from its supposed founders, and failed attempts to recoup the lost funds.
The apparently well-orchestrated scam centers around a mysterious individual called Marco Fike, the COO of Giza. Among the eight investors, partners and former employees of Giza interviewed by CNBC, all claim they have never seen Marco Fike’s face.
The ICO was for a supposed start-up called Giza, which claimed to be developing a super-secure device that would allow people to store cryptocurrencies.
It carried out its ICO in January and drew investors for several weeks after. One person who put money into the project told CNBC that they invested ether that was equivalent to $10,000 at the time, and another said they had put in around $5,000 worth of ether.
At the beginning of February, Giza had raised and was holding more than 2,100 ethereum coins, which at the time were worth around $2.4 million. All but $16 worth of those ethereum coins are now missing.