A blockchain project founder says a crypto exchange swindled him, and it points to a broader problem in the IEO market

Quick Take

  • Cryptocurrency exchange Coineal recently canceled an IEO for blockchain security company CYBR, whose founder now claims that Coineal faked IEO sales volumes and scammed them out of listing fees
  • Companies seeking an IEO are regarding it more and more as a marketing opportunity rather than fundraising venue, as some exchanges charge high listing fees and use the funds raised from IEOs for marketing campaigns
  • IEOs replace ICOs as the latter have lost steam amidst pervasive frauds and scams. However, exchanges that conduct IEOs may still expose investors to risks as they reportedly pump token sales volumes to attract investors

On day two of his company’s initial exchange offering (IEO) on the cryptocurrency exchange Coineal, founder Shawn Key felt incredibly optimistic. 

He had paid Coineal 11.5 BTC (around $76,590) for his little-known token, CYBR, to be listed, and a large order just suddenly bumped the sales to around $2.1 million, or approximately 40% of the total token supply. As most other IEOs on Coineal ended up selling out, the company (also named CYBR) could potentially rake in as much as $4 million from this listing. 

As the IEO continued, the sales soon slowed down, and even came to a halt. By the time that the IEO ended on July 3, the Coineal website showed that only 56.56% of CYBR were sold. Even worse, this percentage dropped to near 0 after Key asked the exchange for the money raised from this IEO and questioned the accuracy of the sales result. Coineal subsequently announced that it had decided to cancel CYBR’s listing and refund all participants in the IEO. 

Key and his company ended up receiving nothing from this IEO, not to mention losing the 11.5 BTC that he paid up front to get CYBR listed. Meanwhile, the exact number of CYBR sold on Coineal remains myth. At the end of the token sale, the initial 56.56% of total token supply, which…

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