In spite of having a somewhat reassuring name, “Confido,” a startup company that initially promised a blockchain based app, has suddenly disappeared into nothingness just days after selling over $374,000 worth of tokens for their ICO.
Smoke & Mirrors: The Disappearance of an ICO
No statement has been made by Confido since the disappearance, except for a Reddit post created by someone claiming to be the company’s support representative. According to the post, which can be found on the /r/cryptocurrency subreddit, the founder of the company, Joost van Doorn, claimed that the ICO was facing legal trouble of some sort. No further detail has been divulged since.
Confido aimed to be a payment solution for online shopping using cryptocurrencies. Payment for a product would be held in escrow until proving successful delivery, thus safeguarding the buyer against scams. Ironically, the company’s vanishing act has only confirmed the fact that cryptocurrency based transactions sorely need a secure escrow service.
Since the news of this disappearance broke, Confido’s market cap of $10 million has reportedly dropped by 90 percent. The loss of investor confidence is undeniable, despite the massive inflation of the original figures before the controversy.
Confido’s website and social media accounts have also been simultaneously taken down, with no official record of the ICO to be found anymore. This includes the app’s Facebook, Twitter, Medium and YouTube pages, as well as the subreddit dedicated to it.
It appears that a company by the name of Kraft & Wurgaft, P.C. was responsible for the funds raised by Confido. In so far as the former acted as escrow for the latter, further research shows that Kraft & Wurgaft, P.C. does not appear to have any internet presence, precisely like the rest of the ICO itself.
Eli Lewitt of TokenLot, the company that facilitated Confido’s launch, announced that all funds related to the ICO have also disappeared from their end and are untraceable. Investors who paid for the ICO did so in Ethereum, a cryptocurrency, which means that it is impossible to reverse those transactions. Unlike conventional banking institutions, cryptocurrency transactions do not recognize fraud or even accidental transfers.
Diminishing Support in the ICO Sector
The cryptocurrency market has been mired in controversy for years now. Plenty of financial experts, including former con artist Jordan Belfort, have warned of similar scams in the past. Since anyone can create their own ICO based on the Ethereum blockchain, the community has dealt with myriad problems in regards to accountability. Also, given that any regulation imposed on the cryptocurrency would severely inhibit its functioning, it is unlikely that this will change anytime in the future.
It is probably for these exact reasons that China decided to move forward with their universal ban of ICOs in September of 2017. While the Securities and Exchange Commission (SEC) has only warned the general population of potential fraud similar to the one witnessed with Confido, it remains to be seen what preemptive measures will be taken to combat such incidents in the future.
Shortly after the ban imposed by China, the SEC also set up a Cyber Unit to keep a close eye on the cryptocurrency market.
Similar to how internet-based crowdfunding already works, it is usually the sole responsibility of investors to investigate the claims and authenticity of a new company. Since new investors are often the most ignorant, these scams will continue to target them, and there is little that can be done to predict or prevent further losses outside of being vigilant.