By Cory Rosenstein-Ford

In recent years, cryptocurrencies have rocketed to the forefront of financial news reporting, and established a significant presence in pop-culture. As of July 2018, the cryptocurrency market consisted of more than 1,500 cryptoassets, up from only 14 in 2013. Crypto has spawned a subculture of young investors and issuers with little interest in the conventional, “lame” investment mediums that populate their parents’ retirement accounts. Vice News recently described the blooming crypto subculture as a “total brofest,” in which silicon valley “tech-bros” tout the lavish spoils of exploiting the thinly regulated crypto market while purporting to disrupt traditional Wall Street investing culture. In short, this new crypto-culture eerily parallels the 1990’s animal-house boiler rooms memorialized by the likes of Wolf of Wall Street and Liar’s Poker.

Just as the 1990’s boiler rooms churned fraudulent stocks, ICOs, have become a hotbed of fraudulent cryptocurrencies. A July 2018 study found that over 80% of ICOs made in 2017 were fraudulent. The most prevalent ICO scam is a simple exit scam, under which a fake ICO purports to be raising capital for an investment project. In exchange for contributions in cash or other forms of cryptocurrency, the fake ICO issues investors a new cryptocurrency that will allegedly grow in value based on the success of the investment project it represents. The fake ICO then pockets the investors’ money and shuts down the ICO platform without a trace. For example, five higher profile ICO exit scams—Shenzhen Puin Blockchain, Cryptokami, NVO, Loopx, and Block Broker—purloined nearly $100 million from investors in 2017 and 2018.

Regulators and law enforcement agencies have not caught up to the recent influx of ICOs. However, the SEC’s position as of June 2018 is that most ICOs using tokens or digital assets are securities offerings and will be regulated accordingly. Over the past few months, the SEC has charged ICO issuers with securities violations.

However, because ICOs often involve international transactions, and the geographical movement of cryptocurrency is harder to trace than conventional money, the SEC warns of heightened risk of fraud. Until regulators and law enforcement authorities catch up to ICO technology, consider the following before investing in ICOs:

• If the ICO’s advertising looks too good to be true, it likely is. Be wary of supermodel-clad LinkedIn advertisements and celebrity endorsements. One scam even claimed Vladimir Putin’s support.
• The offering documents should clearly describe the operations and goals of the ICO. Legitimate offering materials won’t simply repeat vague buzzwords. FINRA provides information for investors to consider prior to investing in an ICO.
• The managers of a legitimate ICO should be easily traceable on LinkedIn and Google.

Even still, some ICO scammers spend tens-of-thousands of dollars developing websites, promotions, and whitepapers that appear legitimate. Buyer beware.

According to CNBC, more than 800 cryptocurrency offerings—many of which involved frauds—had failed by July 2018.

By A.J. Kim

From the social media obsession to cell-phone addictions, everyone criticizes “millennials” as being the lazy, entitled, and financially unmotivated generation. Many “older” people are often quick to point fingers at this group of individuals who were born between 1981 and 1996 for their flaws and imperfections, including their lack of investments. By classifying all “incompetent” individuals under age 37 as this distinguished generation, our society has neglected the most important fact: millennials reached their adulthood in the midst of the financial crisis along with the rising living costs and increase in student loans. Thus, instead of blaming this newest working class for their lack of investments, we should instead ask “what can our society do to encourage millennials to invest more?”

A recent report by FINRA surveyed 1,814 millennials in an effort to explore the myths surrounding the millennials’ trends of non-investments. Despite the popular beliefs that millennials are simply lazy or aloof about their long-term financial goals and retirement plans, millennials are hindered by the lack of financial education and investment knowledge. In addition to their large debts and insufficient income, 39% of the respondents cited their lack of knowledge as the primary barrier to investing. Parents or family members are the typical key factors that influence the millennials’ decision to invest; however, such valuable resources are not readily available to everyone due to the diverse socio-economic backgrounds. Furthermore, there are major investment disparities along geographic, gender and racial lines: (1) urban millennials are 50% more likely than rural millennials to invest; (2) male millennials are more confident in their investment decisions than female millennials; and (3) African-Americans and Hispanic millennials are 29% less likely to invest than White millennials.

Thus, financial education is paramount to all millennials despite their socio-economic backgrounds. With the over-all participation rate of 93%, employer-sponsored retirement accounts are the gateway to investments for many individuals with no prior investment experience or education. However, more efforts are needed as the employers merely offer these accounts as a part of their employment benefits to full-time employees without any basic investment guidance while completely neglecting their part-time employees. Furthermore, higher education institutions should incorporate financial education as a part of their mandatory curriculum, regardless of the students’ fields of study, to prepare individuals for real-world financial consequences.

We cannot foresee the future of millennial retirement and the investment trends of the next working class, “Generation Z.” However, the desperate need of financial education is apparent as these generations will make up larger cohorts of the population and financial markets in the near future.

For all my fellow millennial readers, check out FINRA’s page dedicated to us: http://www.finra.org/investors/millennials