ICO scams are no longer news to many in the crypto community. There have been repeated warnings by financial regulators on the risk of losing investments in Initial Coin Offerings. What is news these days seems to be how some of these scammers were able to execute such elaborate schemes without discovery for such a long time. Benebit may become the most elaborate ICO scam to date.
The Benebit was among a number of startups that received positive reviews from many sites, which garnered a lot of traffic to the ICO site and its social media accounts. The buzz around Benebit was such that many analysts estimate that the scammers spent up to $500,000 in marketing funds in the well-orchestrated scam.
Reports say that the company which started the marketing awareness for the project months ago made away with an unspecified amount which is estimated not less than $2.7 million. Some estimates posit that the company may have made away with up to $4 million.
Interestingly, before the news of the scam broke, the company had had a lot of positive reviews as one of the potential successes of 2018. A situation which has made many of these sites to try scrubbing off such posts. One of the review sites Topicolist, which is yet to take down their review of the Benebit ICO described it as a decentralized platform that brings consumers and companies together causing inter-brand interaction across borders. Ironically, the post reports that Benebit promised a customer loyalty program.
The buzz around the ICO was a well-planned massive campaign that generated up to 90,000 followers on the Benebit Telegram channel, which is the only social media account of the company that has not been deleted because its management was outsourced. An attempt to join the channel was unsuccessful, an indication that the access link has been revoked.
However, reports say that investors in the ICO now use the channel to express their frustration over the loss of their investments. One investor said that they invested 300 ETH while another said 14 BTC.
That the scammers made effort to cover their tracks is evident in the manner they hired people who managed all the marketing platforms for them. The pre-sale event with which they made the money was managed by a company, ICO Syndicate which specializes in Initial coin offering management. They seem to be the ones bearing the brunt of frustration from the investors.
A look at the ANN thread of the startup with the bitcoin community BitcoinTalk shows that the December 8 thread was posted by another hired hand Kobzar, who has deleted the thread and replaced it with an explanation that he was hired to post the announcement for the company with a promise of payment in tokens. He said that he too was frustrated that the ICO turned out a scam.
It became obvious that the Benebit was a scam when a user found out that passports of the team were pulled from pictures of a boys’ school website in Britain. A discrepancy that a routine check may have discovered. This once again highlights the failings of the system and the need for tighter regulations.
That most review websites gave positive marks to the ICO is another system failure because it shows that none of them did any background checks or research on the company before approving of the project. This means that at the end of the day, the onus for due diligence squarely lies with the individual investor.
The company which claims to be registered in the British Virgin Islands excluded participation by US citizens and had planned the ICO main sale from January 22 – February 28, and had the fact that the scam was not discovered during pre-sale, the scope of the scam would have been wider. It took the discovery of the fake passports for the scammers to delete their sites and were gone.
There have been repeated warnings by regulators such as SEC that ICOs are high-risk investments. It is obvious that unless stringent measures are taken, there are a lot of people who will incur the loss because the prospect of profit is just irresistible. Unfortunately, not every investor knows what it takes to recognize a scam, and the truth is that, like in the case of Benebit, not every scam is easy to identify because they seem to get less obvious and more sophisticated with time.
As the distraught investors complain at the Benebit Telegram channel, there are many others that seem to see the humor in the whole affair and were even posting suicide helplines. Be that as it may, the blame still lies with the scammers, however, it is a clear message to all that ICO is still high-risk investment still in a trial stage. Until it is fully regulated, investment is still at owner’s risk.