New Zealand’s Financial Markets Authority (FMA) has issued a warning to potential investors to stay away from a teen’s NZD$220 million cryptocurrency venture, fearing that its success may be overblown.
In August, 19-year-old Ashutoush Sharma, a former student at Auckland Grammar, launched e-commerce site Sell My Good. This week, he began accepting investor funds with the aim of raising $220 million for his cryptocurrency SMG Cash, the New Zealand Herald reports.
However, according to the FMA, SMG Cash falls under its jurisdiction and, therefore, warned potential investors away from it. A spokesperson for the authority said:
We recommend New Zealand investors do not subscribe to this offer.
A white paper for his initial coin offering (ICO) states that the e-commerce site has five million users with 10,000 new listings of goods for sale on a daily basis. It also claims to have conducted $80 million of sales since its launch.
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However, despite claims that Sell My Good is ‘seeing explosive growth rates,’ an investigation by Weekend Herald suggests that economic activity and traffic on the site have been inflated by a factor of 10,000. Additionally, the investigation showed that there were only up to 400 listings on the site, many of which were up to four months old.
It’s also alleged that 10 percent of the sales on the site were placed there by Sharma and Dinyar Irani, a University of Auckland student and the company’s CEO. Interestingly, with nearly 100 percent of visitors originating from Japan, Sharma said:
It’s not [true] that we’re bullshitting.
The FMA has raised concerns about the cryptocurrency venture, but claimed they had ‘not received a satisfactory response’ from Sharma.
According to him, though, many early investors from New Zealand are investing their money into the scheme, with claims that he has raised over $2 million to date. But, with the FMA failing to trust and believe in Sell My Good, they have to now consider ‘whether statements in the white paper are accurate and can be substantiated.’
The use of ICOs to raise funds for various projects has become a contentious topic of discussion in recent months. Even though ICOs have helped countless companies get up and running, there are many others that are linked to fraudulent activities. Such is the feeling toward them that South Korean authorities banned the use of ICOs in September, following similar steps taken by China as it cracked down on the market.