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<p>Initial coin offering (ICO) investment vehicles have been gaining popularity since their introduction, in 2013, with a market capitalization now reaching $250&#xa0;billion worldwide. However, not a week goes by without hearing about new ICO fraud in the news. This type of investment is very risky and leads potentially savvy investors to use strategies to protect themselves. This study, using prospect theory and Sun Tzu’s seminal work <i>The Art of War</i>, investigates how risk aware ICO investors are in their investment decision making to protect themselves. Because they know they can lose a great deal, as in gambling, their knowledge of the ICO ecosystem makes them quick to protect themselves from these risks. They take calculated risks, but make serious preparations before investing. The findings indeed demonstrate that the decision making process of risk-aware ICO investors follows a pattern similar to that of Sun Tzu’s description of planning for war. The process can also be interpreted through the lens of prospect theory. However, unlike pure gamblers, these savvy investors seek investment rather than speculation. This study contributes to the emergent literature on ICOs by highlighting the behavior of informed investors engaging in highly risky investment ventures. It also illustrates the downsides for investors of the lack of regulation. In conclusion, as for soldiers preparing to face the enemy, information gathering plays a key role in the decision making process of ICO investors.</p>

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Gamblers going to war: preventing investment in fraudulent initial coin offerings

  • 期刊论文

  • 发表日期：

    2025年6月21日

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  • Annie Lecompte

摘要

Initial coin offering (ICO) investment vehicles have been gaining popularity since their introduction, in 2013, with a market capitalization now reaching $250 billion worldwide. However, not a week goes by without hearing about new ICO fraud in the news. This type of investment is very risky and leads potentially savvy investors to use strategies to protect themselves. This study, using prospect theory and Sun Tzu’s seminal work The Art of War, investigates how risk aware ICO investors are in their investment decision making to protect themselves. Because they know they can lose a great deal, as in gambling, their knowledge of the ICO ecosystem makes them quick to protect themselves from these risks. They take calculated risks, but make serious preparations before investing. The findings indeed demonstrate that the decision making process of risk-aware ICO investors follows a pattern similar to that of Sun Tzu’s description of planning for war. The process can also be interpreted through the lens of prospect theory. However, unlike pure gamblers, these savvy investors seek investment rather than speculation. This study contributes to the emergent literature on ICOs by highlighting the behavior of informed investors engaging in highly risky investment ventures. It also illustrates the downsides for investors of the lack of regulation. In conclusion, as for soldiers preparing to face the enemy, information gathering plays a key role in the decision making process of ICO investors.