It was at the start of 2017 that the initial coin offering (ICO) sector first took off in popularity. There were countless startups that were able to secure funding for their new projects through holding a token sale, which they probably would have struggled to otherwise receive if they were going down the traditional venture capital funding route.
While over time, more and more established companies entered into the space and along with it more and more money flooded in, there were still high rates of fraudulent offerings taking place.
This led to the authorities across the world taking note and issuing warnings to their residents when it came to investing in ICOs. The authorities had largely been caught off guard when it came to the sudden popularity of ICOs and as a result they did not have proper regulations or oversight in place.
The likes of South Korea and China decided in September 2017 to ban ICOs from taking place on their shores. While there are indications that South Korea is going to end their ICO ban in the near future, the ICO ban in China does not look like it is going to end any time soon.
What are the details about this latest setback for ICOs in China?
There has been an increased crackdown on the ICO and cryptocurrency space in China by the respective authorities.
There are three large internet companies on which they are putting a lot of focus on in particular. They are Tencent (BAT), Alibaba and Baidu. There have been many sites shut down as a result of their activities which are deemed to be against certain regulations.
There is also the CEO of a successful ICO that is now facing up to 15 years in prison. Eran Eyal is the founder and CEO of Shopin that managed to raise more than $42 million during their April ICO.
He is being accused of having defrauded investors when he was part of another project called Springleap, which is a company that specialising in worldwide outsourcing. He is alleged to have made false representations, apparently lying and exaggerating in order to attract new investors.
The Chinese authorities have not taken too kindly to these accusations and they are pursuing a case against Eyal as a result of this. It will be interesting to see what the outcome may be, with 15 years being a hefty price to pay.