The economics of financial scams: Evidence from Initial Coin Offerings

Author

Kenny PHUA
Bo SANG, Singapore Management UniversityFollow
Chi Shen WEI
Yang YU, Singapore Management UniversityFollow

Publication Type

Working Paper

Version

publishedVersion

Publication Date

12-2023

Abstract

We examine the economics of financial scams by analyzing the market for initial coin offerings (ICOs). Using data snapshots of 5,873 ICOs, we find that irregularities in ICO characteristics across listing websites predict higher scam risk and are likely intentional. These patterns are consistent with a model where malicious issuers maximize profits by using irregularities to screen for naïve investors. Almost half of the ICOs in our sample may be scams, amounting to more than U.S. $6 billion in losses. Our results draw attention to the frequent use of screening mechanisms in financial scams.

Keywords

Financial scams, Forensic finance, Cryptocurrency

Discipline

Finance and Financial Management | Technology and Innovation

Research Areas

Finance

Areas of Excellence

Finance and Financial Markets

First Page

1

Last Page

69

Identifier

10.2139/ssrn.4064453

Publisher

SSRN

Citation

PHUA, Kenny; SANG, Bo; WEI, Chi Shen; and YU, Yang. The economics of financial scams: Evidence from Initial Coin Offerings. (2023). 1-69.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/7439

Copyright Owner and License

Authors

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.

Additional URL

https://doi.org/10.2139/ssrn.4064453