CYBR Blockchain Security Crypto Project Founder Loses 11.5 BTC To Coineal Exchange Listing Scam
CYBR founder, Shawn Key, claims that his company has fallen victim to a scam ran by cryptocurrency exchange Coineal and this represents a larger problem in the crypto markets industry. Cryptocurrency exchanges are under increased scrutiny from industry stakeholders and regulators as the number of scams being run through crypto exchanges is on the rise.
Key created an initial exchange offering (IEO) for his company, CYBR, and the company was listed on Coineal. Key had made a payment of 11.5 BTC (fiat currency value of around $76,000 at the time) to the exchange for the listing of the CYBR token. On the second day, a large order for the token suddenly bumped the token sales to around $2.1 million which was about 40% of the total supply of tokens available during the IEO.
Coineal has a reputation of selling out most of the IEOs listed on its exchange and if the same occurred with CYBR, Key expected to make a potential $4 million from the IEO sale.
After the IEO ended on the 3rd of July, Coineal reflected that 56.56% of the CYBR tokens on offer had been sold. Sales had slowed down during the latter stages of the IEO and at one point, they came to a complete halt.
When Key questioned the accuracy of the figures and asked for the funds raised from the sale of the 56.56% tokens, the percentage dropped to nearly 0. Coineal later announced that they had canceled CBYR’s listing and refunded all of the traders who had participated in the IEO.
At the end of the saga, Key received nothing from the IEO and lost the 11.5 BTC which he paid the exchange. The number of CYBR tokens actually sold remains unknown. The final amount apparently raised from the token sale was $3,456 and still, Key did not receive any of it. All he received from Coineal is an Excel sheet which lists all the transactions which supposedly happened during the IEO.
The Problem with Crypto Exchanges
There have been many cases in which crypto exchanges have been accused of pulling similar stunts on unsuspecting crypto startups. Exchanges have the sole power to make decisions about which projects get listed and delisted and this leave companies at a disadvantage.
In some instances, companies have reported that exchanges would lock up the funds raised from IEOs and made use of the money for marketing purposes. At the end of the lockup period, the company itself receives very little or none of the money raised through the IEO. Furthermore, there is no sure way to tell whether the figures given by exchange are a true reflection of what happened during the IEO which makes it easy for companies to be duped.
Exchanges such as Coineal life companies in by claiming to have sold out most of the IEOs previously listed on their exchanges. For a startup, being associated with a popular exchange would be good publicity and a guarantee of profits from the IEO.
There is an increase in the risk of conducting IEOs through exchanges and the absence of ways to confirm records on these exchanges amplified the risks. This is one problem that the crypto industry does not need as it tries to find ways to enter the mainstream.