‘The Wolf of Wall Street’: Digital Currencies are the Biggest Scam Ever

Business‘The Wolf of Wall Street’: Digital Currencies are the Biggest Scam Ever

‘The Wolf of Wall Street’: Digital Currencies are the Biggest Scam Ever

Jordan Belfort, the stockbroker behind numerous scams and who was immortalised in the Leonardo DiCaprio film The Wolf of Wall Street says digital currencies like bitcoin are the biggest scam ever, far worse than anything he ever did.

Cryptocurrencies and ICOs – a Bubble?

Belfort’s biggest warning surrounds initial coin offerings, or ICOs. In an ICO, a company issues cryptographic tokens, such as bitcoin, instead of the traditional method of raising debt or selling shares. The most common use of ICOs is startups who do it using blockchain technology. The tokens can then be traded or exchanged for services by the company. However, in many cases, the startups issuing the tokens don’t have a solid, sustainable business plan, and the tokens may not appreciate in value. ICOs are growing increasingly popular—through September, they had raised $2 billion in the year, compared to $54 million in the same period last year. This year bitcoin has jumped from $1,000 to more than $6,000.
However, cryptocurrencies and ICOs specifically are considered a bubble by many experts. Increasing prices leads to more speculative activity, which raises prices in a vicious cycle. Many people are calling for increased regulation surrounding ICOs, especially after investors have lost millions of dollars in fake or hacked ICOs. Belfort says it is too easy for hackers to steal bitcoin and says he would never buy bitcoin because he knows people who have lost all their money through cryptocurrencies.
“It’s the biggest scam ever, such a huge, gigantic scam that’s going to blow up in so many people’s faces,” Belfort said. “It’s far worse than anything I was ever doing.”
Belfort also said he estimates 85% of people are honest in how they run ICOs, but the 5-10% trying to scam people have created a negative environment for everyone, and the risk isn’t worth people investing in ICOs.
Belfort was convicted of numbers crimes including fraud and spent 22 months in prison for scams that cost investors $200 million. Since his release, he has been enjoying a second career as a motivational speaker and author that has earned him millions of dollars.

ICO Warnings Are Always Trending

Belfort isn’t the first person to be wary of ICOs. They were banned in China after the government lumped them with pyramid schemes, and the UK’s Financial Conduct Authority has warned investors that they shouldn’t rely on ICOs. Canadian regulators have also said cryptocurrencies should be subject to regulation. In the U.S., the Securities and Exchange Commission warned of pump-and-dump schemes where companies don’t follow through on promises and cash out quickly after an ICO, leaving investors high and dry.
Belfort’s warning against ICOs comes soon after JPMorgan CEO Jamie Dimon expressed similar sentiments regarding bitcoin. However, unlike Dimon, Belfort doesn’t believe there is anything inherently wrong with the idea of cryptocurrencies—it just comes down to the execution, especially when they are used for fundraising.
As ICOs continue to gain steam, governments and investors around the world will have to decide how to regulate the space and if it is a reliable and sustainable form of raising money. With the vocal outcry from one of the most notorious recent fraudsters, things could be tipping against ICOs.