Performing an ICO generally involves deploying code to mint a coin on the Ethereum network, outlining the ambitions for a project on a website, and soliciting investment. “Many projects were little more than a white paper and a landing page with a countdown timer—the barrier to entry was minimal,” says Wang.
Though a handful of crypto projects that raised funds by ICO remain in operation—including Ethereum itself—the boom was largely characterized by grift and chicanery, analysts say, before financial regulators eventually cracked down on the practice. Frequently, developers misrepresented the utility and capabilities of their projects, manipulated the price of coins to generate hype, and wildly overstated the profits available to investors, analysts claim.
Developers “were trying to really push the idea of getting crazy returns,” says Nicolai Søndergaard, research analyst at blockchain analytics company Nansen, adding, “That’s where the FOMO really comes in.”
The clamor around ICOs led credulous investors to conduct little due diligence in their eagerness to profit, in a similar way to traders who today race into dubious memecoins. “There are a lot of parallels between the meme frenzy and ICOs,” says Søndergaard. “It’s quite easy to sell an idea for the masses, then rug it.”
The developer going by the name Dylan Kerler began to promote EthereumCash, their most popular coin, in early October 2017.
The developer followed largely the same playbook as their previous launches: They minted the coin on Ethereum, created a website, and marketed on BitcoinTalk, Twitter, and Telegram. To create a swell of enthusiasm, they handed out bundles of the coin for free in what’s called an airdrop. Then they promised to publish a white paper, which at that time was considered a signal of legitimacy likely to propel the price upward.
“You want to push a white paper. That’s what gets people interested,” says Søndergaard. “Sometimes, just the promise of a white paper was enough.”
Screenshots of the now-deleted website posted on Telegram reveal how the coin was presented to prospective investors. “We aim to make the transition from fiat currency to cryptocurrency as easily as possible whilst still maintaining an heir [sic] of integrity an [sic] sophistication,” the website stated. Underneath, the page featured an image of a bank card that would purportedly allow holders to spend EthereumCash in stores.
Within a few days, hundreds of people signed up for the EthereumCash airdrop, a spreadsheet obtained by WIRED shows. Meanwhile, the BitcoinTalk thread was abuzz with conversation. “Let [sic] spread the word and get people to notice this great token,” wrote one forum user. By October 19, EthereumCash had risen in value to around $1.3 million.
However, as early investors celebrated, behind the scenes the developer going by Dylan Kerler was beginning to sell.
In the days after creating EthereumCash, the developer delivered millions of units to a variety of crypto wallets under their control. One of those crypto wallets, whose alphanumeric identifier begins in 0x7f3E2, was then used to sell large quantities into the market, a CertiK analysis shows.