The majority of ICOs are scams, but it's still a booming business, said CoinList CEO and Co-Founder Andy Bromberg.
"The hit rate is very low in this industry," Bromberg told CNBC, regarding ICOs, or initial coin offerings, a crowdfunding way to raise funds for cryptocurrency ventures.
"CoinList has publicly had on our site only three ICOs out of more than 900 in-bound applications," he said on "Fast Money" Monday. His company, CoinList, is an online platform that guides token creators through the IPO process while helping investors determine which IPOs are legitimate.
ICOs, a still-unregulated means of raising money in its "modern form," Bromberg said, have been around for less than a year and thus are 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.
But even as major cryptocurrencies like bitcoin have plunged, ICOs continue to gain speed. Already, ICOs have raised about $3 billion in funds this year — and the first quarter isn't even over yet. That's almost half of what ICOs raised last year. Still, Bromberg said, roughly half of all ICOs in 2017 failed.
"They're incredibly risky early stage investments," said Bromberg, whose company manages nearly a billion dollars in crypto investments.
Meanwhile, bitcoin and other cryptos are falling fast. Bitcoin, the largest digital coin by market cap, fell below $8,000 again, down 40 percent this year. Ethereum is down 33 percent year to date and Ripple is down 70 percent.
Scrutiny from regulators, such as the U.S. Security and Exchange Commission, over ICOs is increasing, something Bromberg called "reasonable." He also said it was wise for internet companies, such as and , to ban cryptocurrency ads on their platforms.
"Evaluating these sales is really hard," he said. "It requires a great deal of expertise. That's expertise that very few people have because the ICO industry is so new."
While Bromberg said, "regulation is coming," for ICOs, he also said there are things investors can do now to determine if an ICO is worth putting their money into. This includes evaluating the integrity of the company, the technical team and what products the company has built in the past.
"At the beginning, you have to do the same team evaluation for any startup or any company you're investing in," he said. "And that's really what helps you determine if the sale will help you finance a company that builds something meaningful, or if they're just raising money for the sake of raising money and going to run away with it."