Facebook announced in a blog post Tuesday that it was banning cryptocurrency advertising from the platform entirely. The company said that many ads for cryptocurrency investment opportunities, like initial coin offerings, were "not currently operating in good faith." Facebook has a point. Take Prodeum for example, a Lithuanian cryptocurrency startup that appeared online Thursday. By Monday, it was gone.
Prodeum's 12-page white paper outlined plans to build a database of fruits and vegetables on the Ethereum blockchain. That idea might sound strange, but it's not the first of its kind. Prodeum asked investors to help raise as much as 5,400 ether—roughly $6.5 million—in an ICO. But after collecting what looks like less than the price of two Chipotle burritos, Prodeum disappeared. The company's sparkly, professional-looking website was replaced with a single, trolling word: penis.
A press release on both an NBC affiliate and a New Jersey local news site vanished, along with Prodeum's website, Twitter account, and Telegram channel. Emails to the startup's customer support address bounce back. It seems like Prodeum—which sounds suspiciously like the urinary-tract infection medication Prodium—was yet another cryptocurrency scam.
'It's easier to dupe someone into investing in your ICO in 2018 than your fake real estate business.'
It joins a long line. In April of last year, there was Mumbai-based OneCoin, a once-lauded blockchain startup that was discovered to be a Ponzi scheme—but not before its founders allegedly funneled at least $350 million through Germany. Then there was Confido, which disappeared after raising over $370,000. Don't forget BitConnect, an anonymous cryptocurrency exchange that was accused of being a Ponzi scheme numerous times before it finally shut down.
Not every ICO is a scam, and many cryptocurrency startups are legitimate. But the shady, largely unregulated cryptocurrency investment landscape is littered with dozens of fraudulent ventures. (They're also susceptible to hackers; more than 10 percent of the $3.7 billion raised through ICOs has been lost or stolen, according to a recent analysis from the accounting firm Ernst & Young.)