- CoinList CEO Andy Bromberg says investors should be careful of fraud when buying into initial coin offerings.
- Most ICOs are "low-quality," he warns.
- Bromberg recommends investors get "good legal counsel that understands what they're doing."
CoinList CEO Andy Bromberg on CNBC Tuesday cautioned investors to be careful of fraud when buying into initial coin offerings.
"The vast majority of ICOs are scams or people seeking to raise money easily," said Bromberg, whose company is a platform that helps crypto start-ups find investors.
ICOs are a crowdfunding way to raise funds for cryptocurrency ventures.
Bromberg made his comments after reports of ICOs being vulnerable to hackers.
On Monday, Securities and Exchange Commission Chairman Jay Clayton said: "Market professionals, especially gatekeepers, need to act responsibly and hold themselves to high standards. To be blunt, from what I have seen recently, particularly in the initial coin offering space, they can do better."
Bromberg agreed with Clayton's remarks, calling most ICOs "low quality" and said they do not go through the proper steps.
"What people need to do is get good legal counsel that understands what they're doing," he said in a "Squawk Alley" interview, someone who knows "when these securities need to be registered or exempted with the SEC, when they need to go through processes with other agencies, and what they actually need to do in advance of running a token sale."
This still-unregulated means of raising money in its "modern form" has been around for less than a year, Bromberg said, and thus is an attractive way for start-ups to raise capital while bypassing regulations. As the value of cryptocurrencies like bitcoin took off in 2017, ICOs became increasingly popular.
Bromberg predicted coin offerings will become more closely monitored in the coming year as they grow more widespread.