Gangsters and hackers

In parts 1 and 2 we examined most successful ICOs and those ones that raised questions. Today it’s time to look at two projects whose reputation was hopelessly damaged despite a successful start. One of them – Dragon – was involved in money laundering and was rumored to work directly with a member of the Chinese mafia group, the other – The DAO – zero patient, the first domino in the chain of tightening SEC. The DAO team did not harm directly, but due to its imprudence, left a loophole for the hacker, which led to monstrous cash losses.

Dragon – casino with money laundering and incredible revelations

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Profile: Macau based decentralized currency for casinos & players
ICO: February – March 2018
Coin price: $0.31
Funds raised: $32s products built (wallet, exchange), prepaid credit card and global cash machines coming soon

This is one of the most controversial and scandalous project in our list. It is Dragon ICO, which is planned to be backed by physical asset: a floating casino in Macau which will be built partly using money raised during ICO. It presents itself as a utility token, and users will be able to use these tokens in casino when it’s built.

Dragon team claimed earlier this year that it had raised $320 million in capital before the public token sale opened and was planning to raise even more. ICO finished in March 2018, however there’s no official data about the amount raised and ICO trackers use “$320 million” as a final “amount raised”.

Another interesting recent story is a leakage of information published by New York Times in April 2018. They found out that Dragon Coin worked on their marketing campaign in close contact with Cambridge Analytica, the British company that was in a middle of scandal during the US President Trump elections when they improperly gained access to personal data on millions of Facebook users. Moreover, It turned out that the management of the Dragon Corporation involved a gangster Wan Kuok-koi “Broken Tooth”; he was previously the gang leader of ex-14K triad. That seemed so horrible that financial officials from Macau issued cryptocurrency crime warnings.

That lead to the situation when crypto companies in Macau won’t receive any help from financial institutions in the future. However, some people have pointed out that no rules have been passed against casinos developing ICOs.

The DAO – patient zero in the US regulation restriction story

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Profile: The DAO was a digital decentralized autonomous organization, and a form of investor-directed venture capital fund.
ICO: May 2016
Coin price: none
Funds raised: $150 million
Today: project closed, token delisted

The DAO Foundation is the best example of the gainful fundraising in no way guaranteeing the success of the project.

The DAO launched the initial proposal in May 2016, and then the public actively discussed its goal: to create a decentralized venture fund. The project wanted to introduce a voting system that would help the society determine how the cryptocurrency manager of funds should spend money. No funds would go unnoticed in the pocket of one of the project leaders.

According to the plan, it was to become the first decentralized venture fund based on Ethereum.

From the perspective of investors, DAO offered 100% decentralized business management. But soon there was a large-scale hacking, and ICO lost a third of its funds – 3.6 million ETH (about $60 million). DAO did not recover from this blow, and the Ethereum community voted for a hard fork to regain the losses and “roll back” all malicious transactions. That’s how we got Ethereum and Ethereum Classic networks. The fund’s weakness was known in advance when raising funds, but the authors and investors hoped for the best. That’s the lesson of the story.

The DAO was delisted from trading on major exchanges such as Poloniex and Kraken in late 2016. And in July 2017 after serious investigation the SEC decided that such incidents with a hacker attack and giant loss of money are unacceptable for the American economy and began to develop procedures for protecting ordinary users that are investing in security tokens. As a result, the process of launching a token sale in US became much more complicated.