Wolf of Wall Street Jordan Belfort says initial coin offerings are 'the biggest scam ever'

Jordan Belfort
Mr Belfort has earned millions since leaving prison Credit: AFP

The American stockbroker immortalised in the film The Wolf of Wall Street has warned that the craze for initial coin offerings has become "the biggest scam ever".

Jordan Belfort said ICOs, a new fundraising method linked to cryptocurrencies like bitcoin, are "far worse than anything I was ever doing".

Mr Belfort, who was played by Leonardo DiCaprio in the 2013 film, spent 22 months in prison for crimes including fraud after running scams that cost investors around $200m (£150m). Since leaving prison he has earned millions as a motivational speaker and author.

ICOs involve a company issuing cryptographic tokens, usually in exchange for a cryptocurrency like bitcoin or ether, as an alternative to selling shares or raising debt. Those cryptographic tokens can then be separately traded, or exchanged for services from the company itself.

Over $2bn was raised in ICOs in the first nine months of 2017, according to CB Insights, compared to just $54m in the same period last year. This year bitcoin has risen from under $1,000 to over $6,000.

Leonardo DiCaprio playing Jordan Belfort in The Wolf of Wall Street
Leonardo DiCaprio played Belfort in The Wolf of Wall Street Credit: Mary Cybulski

However, many figures have warned that ICOs, and cryptocurrencies in general, are a bubble, with rising prices prompting more speculative activity, which in turn pumps up prices. Some have lost millions in fake or hacked ICOs, leading to growing regulatory scrutiny.

"It's the biggest scam ever, such a huge, gigantic scam that's going to blow up in so many people's faces," Mr Belfort told the Financial Times. "It's far worse than anything I was ever doing."

"Promoters [of ICOs] are perpetuating a massive scam of the highest order on everyone. Probably 85pc of people out there don't have bad intentions but the problem is, if 5 or 10pc are trying to scam you it's a f****** disaster."

China has banned ICOs and the UK's Financial Conduct Authority has warned investors not to rely on them. However, those who have backed them have seen enormous returns in a short time, according to a report from venture capital firm Mangrove Capital Partners.

The price of bitcoin fell from its Saturday high of around $6,150 on Monday, to trade at around $5,900. Recently, JP Morgan chief executive Jamie Dimon said trading bitcoin was "stupid" and that it will blow up.

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