Why is it simple to hack cryptocurrency startup fundraisers?

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Why is it simple to hack cryptocurrency startup fundraisers?
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There were periodic occurrences in this summer of cons and scams of ‘initial coin offerings’, startup fundraisers issuing coins, token or cryptocurrency to one concerned in making investments in Blockchain-related corporations. A startup named CoinDash lost $7 million in mid-July after a hacker changed the address investors were sending funds to so the money went to a mischief-maker. In the wake of this event, at least three ICOs were negatively impacted that allowed the mobs to grab a good $30 million. During the proliferation of ICOs, startups have to put a lot at stake.

ICOs have been highly popular over the past years. However they are risky just like other unregulated financial mechanisms. The startups conducting them are not necessarily ready for the exposure their fundraisers may receive. Participants are continually becoming more vulnerable to fraud given they do not know the internal and external technicalities of it.

Wallet defense

However, not all ICOs get hacked of course. Many startups are able to restrict losses and even defend themselves completely and their investors against these potential scams and threats. But being attacked is becoming a norm day by day which might shatter the beliefs of investors. Companies are reporting that their fundraising sites are being hacked. The attackers are trying their best to undermine companies’ ICO. However, the companies are continuing to expand their security precautions and improve the overall protection of their systems and websites.

An evaluation made by a firm named Chainalysis reported that over the past several years ICOs have attracted over $1.6 billion investment and the cyber-criminals have emptied over 10% of these funds. The digital currency market capital is soaring at a constant rate and is now is over $90 billion.

Social engineering is one the means adopted by criminals. Phishing campaigns and social media manipulation is used as a disguise to act as legit administrators of ICO so they can pass on fake information to prospective investors around the web about where to send money and even the time of ICO taking place.

Enter Feds

An investigation is being carried out by The Securities and Exchange Commission. They have specifically focused on the issue whether unidentified ICOs constitute illegitimate securities offerings. The probe into 2016 ICO of digital currency platform Decentralized Autonomous Organization reached to a decision that DAO Tokens are securities that DAO should have registered as a securities exchange. DAO was an early ICO when the concept was still new. This was not the only reason for its recognition but also losing $50 million in investor money because of a susceptibility that hackers were able to take advantage of.

The agency is pretty concerned about impact ICO scams can have on retail investors. Some countries are considering to impose regulations because of money laundering issues. China has announced a total ban of ICOs.

For bow, startups and investors must have a cautioned approach towards ICOs. Some are of the view that ICOs would reach a level of stabilization in near future however it is just a matter of speculation.

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