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Initial Coin Offerings, Information Disclosure, and Fraud

Author

Listed:
  • Lars Hornuf
  • Theresa Kück
  • Armin Schwienbacher

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.

Suggested Citation

  • Lars Hornuf & Theresa Kück & Armin Schwienbacher, 2019. "Initial Coin Offerings, Information Disclosure, and Fraud," CESifo Working Paper Series 7962, CESifo.
  • Handle: RePEc:ces:ceswps:_7962
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    File URL: https://www.cesifo.org/DocDL/cesifo1_wp7962.pdf
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    References listed on IDEAS

    as
    1. Gary S. Becker, 1974. "Crime and Punishment: An Economic Approach," NBER Chapters, in: Essays in the Economics of Crime and Punishment, pages 1-54, National Bureau of Economic Research, Inc.
    2. Adhami, Saman & Giudici, Giancarlo & Martinazzi, Stefano, 2018. "Why do businesses go crypto? An empirical analysis of initial coin offerings," Journal of Economics and Business, Elsevier, vol. 100(C), pages 64-75.
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    Cited by:

    1. Joern H. Block & Alexander Groh & Lars Hornuf & Tom Vanacker & Silvio Vismara, 0. "The entrepreneurial finance markets of the future: a comparison of crowdfunding and initial coin offerings," Small Business Economics, Springer, vol. 0, pages 1-18.

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    More about this item

    Keywords

    initial coin offering; fraud; crypto-currencies; crowdsales;
    All these keywords.

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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