Yet Another ICO Scam

With Bitcoin hitting stratospheric pricing levels, there are scams aplenty trying to cash in on tulip-mania around Bitcoin. This chart from the Wall Street Journal says it all.

Of those trying to cash in, I’m sure some actually have legitimate business purposes and are trying to find new ways to operate financial systems. But many are just scams trying to fool some people out of cash. The latest scammer is PlexCoin. The SEC filed a complaint for an emergency action to freeze the scammers assets and stop selling any more.

Dominic Lacroix, and his company, PlexCorps, were running an initial coin offering of its PlexCoin. It launched the ICO on August 6.

PlexCorps claimed that if you invested $100 USD into PlexCoin at the ICO, you would obtain 769.23 PlexCoin, with an estimated value of $1,353, a return on your investment of 1354% “in 29 days or less”. It’s unclear how they reached the value of “$1.76 per PlexCoin”.

It wasn’t clear what was behind the PlexCoin or who was behind it. That didn’t stop ten of thousands of investors from plowing $15 million into the company.

It turns out that one of the people behind PlexCorps is Dominic Lacroix. In July, the Autorité des marchés financiers (AMF), Quebec’s chief financial regulator, had issued orders prohibiting Lacroix and several associated companies from promoting “any form of investment” to investors in Quebec and operating an investment scheme from within the province, even if it was targeted solely at investors who did not live in Quebec. Lacroix had several previous problems with the Quebec financial regulators.

According to the SEC complaint, the ICO of PlexCoin was an offering of securities.

PlexCoin, like Bitcoin has limited utility. There is no argument that crypto-currencies are growing in value. The problem is that even though there is value being created, it’s not being used as a currency very much. Rightly so. It makes poor economic sense to use a rapidly rising commodity to pay for a transaction if you have alternatives.

I think it is a commodity and not a currency. Theoretically, you could pay for your groceries with gold if the store was willing to accept the gold. Like a commodity, the commodity future exchanges are going to start trading on Bitcoin futures. The CBOE starts on December 11, following by the CME on December 18. It will be interesting to see whether some short selling will put pressure on BitCoin’s rise in value.