Biggest Crypto Coin Sale Fueled by ‘Pump’ Scheme, Research Says

It would become the biggest digital token sale on record. Over 11 months in 2017 and 2018, a little known software maker named held an initial coin offering for a new cryptocurrency, raising more than $4 billion. Backed by billionaire heavyweights including PayPal co-founder Peter Thiel, hedge fund magnates Alan Howard and Louis Bacon, and German entrepreneur Christian Angermayer, said it would use the money to build tools that would speed adoption of blockchain technology.

The newly minted currency, EOS, soon became mired in controversy.

The U.S. Securities and Exchange Commission fined $24 million in 2019 for failing to register the ICO, and token holders sued last year, calling the sale a “fraudulent scheme” and alleging that the company violated securities laws by making “false and misleading statements about EOS, which artificially inflated the prices for the EOS securities and damaged unsuspecting investors.” And some programmers and digital asset managers have said that the company for years showed scant progress toward its mission.

Newly published research by forensic financial analysis firm Integra FEC, led by University of Texas at Austin McCombs School of Business finance professor John Griffin, raises fresh concerns about the EOS initial coin sale. Griffin, in interviews and a 14-page paper posted to the Integra website Tuesday, highlights a pattern of what he says are suspicious trades during the ICO. The transactions, between potentially connected associates, “pumped up” the price of EOS and induced unwitting investors to buy the currency, he alleges in the paper.

“The seemingly artificial demand from the suspicious accounts had two effects,” Griffin wrote. “It directly manipulated EOS’s offering price upward through the extra buying and inflated the market value of the token. Second, it created the false impression of value of the token, which enticed others to want to purchase the ICO token.”

EOS Raised More Money Than Any Other ICO

Although thousands of companies have held an initial coin offering (ICO), EOS is the world champion, raising $4.2 billion. Competing cryptocurrencies like Ether raised less than $20 million in its ICO, while Bitcoin never held one


Source: ICOBench


Griffin identified 21 accounts that over the course of the ICO engaged in regular, unusually large purchases of EOS, followed by sales of the currency to an exchange less than an hour later, a process he refers to as recycling. In all, the recycled funds amounted to 1.206 million Ether, the cryptocurrency used to trade EOS, or $814.6 million, Griffin estimates, saying the actual amount could be substantially higher and “could have also consisted of other means to manipulate the EOS price upward.”

The paper doesn’t identify the owners of the accounts, and Griffin doesn’t allege wrongdoing by any specific individual or itself. While crypto transactions are traceable through publicly available information, the entities behind them are harder to pinpoint. Griffin said neither he nor his firm received compensation for the paper.

In a statement in response to the paper, pointed to a report issued in July by the law firm Clifford Chance LLP that said it “found no evidence of any arrangements between and third parties by which third parties bought tokens on’s behalf.” Clifford Chance, which completed the analysis with help from PwC and DMG Blockchain Solutions Inc., also said it found “no evidence that purchased tokens on the primary market.” ( had commissioned the study in 2019 amid allegations that surfaced as early as 2017 over whether purchased its own tokens during the sale.)