London’s hedge fund managers see ICOs as a way of getting rid of the association with genuine trading that binary options has wrongfully enjoyed. Here is our full insight, following meetings in London with hedge fund executives
Here in the colloquially termed Square Mile, which is not only London’s financial and electronic trading center, but indeed heads every component of the financial services business for the entire world, an unlikely fondness for Initial Coin Offerings (ICOs), the latest dubious yet viral scheme which is a perfect vehicle for fraud, has emerged among institutions and longstanding FX hedge fund managers.
ICOs are the absolute antitheses of anything that relates to genuine financial market investment, or established methods of private equity.
An ICO, which stands for Initial Coin Offering, is literally an unregulated means by which funds are raised for a new cryptocurrency venture. An ICO is intended to be used by startups to bypass the rigorous and regulated capital-raising process required by venture capitalists or banks.
In an ICO campaign, a percentage of the cryptocurrency is sold to early backers of the project in exchange for legal tender or other cryptocurrencies, but usually for Bitcoin.
What that means is that people who have been turned down by experienced investors because they have no product and no capital, are attempting to dupe members of the public to give them money, so that they can use it to pretend to make something that doesn’t exist, paid for by something that doesn’t exist, and exchange legal tender which has a value, for a tender that doesn’t exist in order to fund a company that doesn’t exist, whose core business is around a product that doesn’t exist.
Given these dubious parameters, why would some of London’s most renowned asset managers and institutions laud the sweeping and overly publicized hype that is a potential means of ensuring that millions of investors around the world are exposed to the claws of the unscrupulous?
Speaking yesterday to three separate companies at their offices, one in the City, which has become a modern, technologically advanced center for today’s algorithmic currency hedge funds, and two others in the traditional Marylebone heartlands of the wealth management sector, senior executives actually shared a common view in that the rise of ICOs and the degenerates that are peddling them with such high profile vigor will remove the insidious fraudsters from any association with our industry.
This is a very good point indeed, and very well worth considering.
One particular hedge fund manager, a former Harrovian with 35 years experience in managing funds, said that whilst he absolutely despises the ICO ideology (for the same reason as we do – Ed) – the natural switch by many confidence tricksters from binary options to ICO and cryptocurrency ponzi schemes means that these people and their ‘product’ will be disassociated from the electronic trading industry.
Indeed, during our discussion, we concluded that during the past ten years, tremendous reputational damage has been done to parts of the retail FX industry because binary options, although bearing no resemblance whatsoever to genuine financial markets products, itself being a weighted gambling system with no connection at all to live markets, in which the ‘house’ simply steals customer deposits, was marketed as a financial markets trading platform by all of its market makers and their brands.
They sat shoulder to shoulder at the same table as the world’s giants at industry related events worldwide, and were featured as part and parcel of a retail trading industry, largely due to the vast marketing budgets that they wield, and much to the detriment of the genuine firms that have worked tirelessly to establish their excellent reputation in good quality regions such as Britain, North America and Australia.
Whilst binary options was never a financial product in its OTC form, but rather a fraud, operated by semi literate criminals who are feared by many, and are able to influence governments to allow their antics to continue unabated, the association with markets access was always present to the point that certain regulators began to outlaw the marketing of OTC derivatives of any type, genuine or not, in entire national markets, Belgium and France being cases in point.
Unlike the street culture and violent behavior of the binary options rabble, London’s astute, experienced and often highly educated hedge fund managers are of the absolute opinion that by natural progression, something else will rise up and they will seize that instead.
Initially, it was thought that binary options, when finally canned, would then become ‘simplified FX’ , which here in London, was feared tremendously, as that would darken the door of the genuine even more, however the switch by many of the main binary options firms to ICOs is very welcome as it completely removes any association with electronic markets.
It remains a mystery as to why ICOs are considered anything to do with retail FX or electronic OTC derivatives trading, when in actual fact they are by definition a type of false private equity ponzi scheme, however the means by which binary options companies operate is ideal for ICOs.
This is because, with binary options, the companies had to ‘pretend’ that there was some degree of investment in a financial instrument, whereas with ICOs, they can operate the same affiliate marketing and false platform system, and then just steal money without even promising anything at all, because they are selling nothing at all.
Sitting yesterday at a private venue in the shadows of long established firms such as DLT Wealth Management, Towers Perrin, and St James, one hedge fund executive explained to FinanceFeeds “It is really great news that these fraudsters are going for ICOs. This removes them entirely from any association with financial markets. Leopards do not change their spots, these people are criminals, and aggressive ones at that, so they will always find something to use to cheat people, but as long as it is nothing to do with our business, then this has to be positive for the FX world.”
“Obtaining new customers is expensive and difficult in today’s competitive world of algorithmic hedge funds, so the last thing we need is former poker site owners and people who have stolen leads from affiliate marketing companies trying to extort large sums in excess of £10,000 which is our minimum investment amount, from retail investors and promising them a managed fund when really they just steal the money and split the losses between themselves and their affiliates.”
Now, with all of the negative experience and police activity against binary fraud, unsuspecting new investors may have been more wary of investing in a genuine managed fund.
There is indeed something very important and poignant in this pragmatic view held by members of London’s establishment. The next step is to stop our own fraternity, be it media, marketing or branding, from placing it in the same category as electronic trading, as it is as different as, well, Eton College from a backstreet slum in Bat Yam.
Image: Kings Road, Chelsea SW3.