The economics of financial scams: Evidence from Initial Coin Offerings

The economics of financial scams: Evidence from Initial Coin Offerings

We examine the economics of financial scams by analyzing the market for initial coin offerings (ICOs). Using data snapshots of 5,873 ICOs, we find that irregularities in ICO characteristics across listing websites predict higher scam risk and are likely intentional. These patterns are consistent wit...

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Bibliographic Details
Main Authors: PHUA, Kenny, SANG, Bo, WEI, Chi Shen, YU, Yang
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 2023
Subjects:
Financial scams
Forensic finance
Cryptocurrency
Finance and Financial Management
Technology and Innovation
Online Access:https://ink.library.smu.edu.sg/lkcsb_research/7439
https://ink.library.smu.edu.sg/context/lkcsb_research/article/8438/viewcontent/SSRN_id4064453.pdf
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Institution: Singapore Management University
Language: English
Description
Summary:We examine the economics of financial scams by analyzing the market for initial coin offerings (ICOs). Using data snapshots of 5,873 ICOs, we find that irregularities in ICO characteristics across listing websites predict higher scam risk and are likely intentional. These patterns are consistent with a model where malicious issuers maximize profits by using irregularities to screen for naïve investors. Almost half of the ICOs in our sample may be scams, amounting to more than U.S. $6 billion in losses. Our results draw attention to the frequent use of screening mechanisms in financial scams.

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