Every financial market is vulnerable to some sort of financial fraud. Most of the regulatory systems in place today were designed as a policy response to abuse or fraud. FDIC bank insurance was a response to bank runs and insolvent banks of the 1930s and earlier. The SEC was a response to stock manipulations of the 1920s. More recently, the Consumer Financial Protection Bureau was created in 2010 in response to consumer mortgage fraud in the early 2000s. So, there’s no reason to be shocked that there’s some fraud going on in the world of cryptocurrencies. What is shocking is the size of the fraud!  This article reports that over 10% of all proceeds of initial coin offerings (ICOs) were stolen, often within hours or days of the ICO itself. The numbers are staggering. The article reports on a study conducted by accounting firm Ernst & Young. The E&Y study looks at 372 ICOs, which raised a total of $3.7 billion in proceeds. Of that amount, over $400 million was stolen through hacks and fishing scams of various kinds. Imagine if 10% of all the proceeds of new ETFs last year went missing through fraud. The problem with ICOs and cryptocurrencies in general is that the lack of regulation not only creates opportunities for fraud; it acts as a magnet for the fraudsters. There are always unethical and sleazy market participants who will use markets to separate investors from their money. If you’re a criminal, why attack in regulated markets like stocks and bonds when you can attack unregulated markets like cryptos? The work is easier and chances of getting caught are much less. When investors discover they’ve been defrauded, they certainly don’t like it, but what recourse do they have? There’s no SEC to call and no bank to give you your money back. Some people just say caveat emptor. Maybe better advice is nihil emptor – no buyer – or buyer keep out.