Initial Coin Offerings, Information Disclosure, and Fraud

40 Pages Posted: 6 Dec 2019

See all articles by Lars Hornuf

Lars Hornuf

University of Bremen - Faculty of Business Studies and Economics; Max Planck Institute for Innovation and Competition; CESifo (Center for Economic Studies and Ifo Institute)

Theresa Kück

University of Bremen - Faculty of Business Studies and Economics

Armin Schwienbacher

SKEMA Business School

Date Written: 2019

Abstract

We study the extent of fraud in initial coin offerings (ICOs), and whether information disclosure prior to the issuance predicts fraud. We document different types of fraud, and that fraudulent ICOs are on average much larger than the sample average. Issuers that disclose their code on GitHub are more likely to be targeted by phishing and hacker activities, which suggests that there are risks related to disclosing the code. Generally, we find it extremely difficult to predict fraud with the information available at the time of issuance. This calls for the need to install a third-party that certifies the quality of the issuers, such as specialized platforms, or the engagement of institutional investors and venture capital funds that can perform a due diligence and thus verify the quality of the project.

Keywords: initial coin offering, fraud, crypto-currencies, crowdsales

JEL Classification: G180, G380, M130

Suggested Citation

Hornuf, Lars and Kück, Theresa and Schwienbacher, Armin, Initial Coin Offerings, Information Disclosure, and Fraud (2019). CESifo Working Paper No. 7962. Available at SSRN: https://ssrn.com/abstract=3498719

Lars Hornuf (Contact Author)

University of Bremen - Faculty of Business Studies and Economics ( email )

Bremen, D-28359
Germany
+49 89 20348619 (Phone)

HOME PAGE: http://www.hornuf.com

Max Planck Institute for Innovation and Competition ( email )

Marstallplatz 1
Munich, Bayern 80539
Germany

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Theresa Kück

University of Bremen - Faculty of Business Studies and Economics ( email )

Bremen, D-28359
Germany

Armin Schwienbacher

SKEMA Business School ( email )

Avenue Willy Brandt
Euralille, 59777
France

HOME PAGE: http://sites.google.com/view/armin-schwienbacher

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