FinTax Crypto Asset Accounting & Auditing Series (II): Issues & Root Causes of Disclosure in ICO/IEO Projects
Current issues in crypto project disclosures—such as insufficient content, weak industry self-regulation, and inadequate government oversight—severely harm investor rights. These problems stem from both external market conditions and flaws in project accounting and auditing.This article analyzes disclosure issues in ICO/IEO projects, explores their causes, and proposes lessons for improving disclosure frameworks.
1 Problems
On January 17, 2025, former U.S. President Donald Trump launched $TRUMP before his presidential oath, briefly driving its market cap to billions of USD.Shortly after, Melania Trump released her own $MELANIA token.The Trumps’ crypto foray disrupted markets: savvy traders profited from volatility, while retail investors suffered losses.Meanwhile, altcoins like ETH (now below $1,800) have underperformed, signaling deeper market stagnation.While “retail reluctance” is blamed for price declines, opaque project disclosures remain a root cause.
Crypto fundraising attracts startups and investors with its low cost and efficiency, yet unchecked token launches and poor disclosures plague the industry.On the one hand, the types and methods of information disclosed to the public before the issuance of most cryptocurrencies are independent behaviors of project parties, and investors can only judge whether the project is worth investing through the known disclosure information. Individual investors are often faced with the price of cryptocurrencies after the purchase of inflated prices, the existence of “rat warehouse” by the project side, and the direct transfer of project funds by the project side. If this so-called “cutting leeks” behavior occurs in the traditional securities market, it has long gone beyond the scope of market behavior and may be suspected of illegal crimes. On the other hand, if the traditional way of equity financing requires that cryptocurrency projects must disclose sufficient information before issuance and obtain qualifications such as currency licenses, it will be contrary to the original intention of decentralization of the crypto industry. In fact, even if it is reviewed by the centralized exchange before the IEO, it can not effectively avoid the above-mentioned problems, and a certain head exchange has experienced a storm of public opinion due to the continuous decline in the price of the new cryptocurrency on the new exchange some time ago.
Therefore, how to regulate the information disclosure of cryptocurrency projects, while providing more adequate information for many investors without affecting the development of cryptocurrency projects and the industry, is an urgent issue to be discussed. In view of this, this paper intends to start from the current information disclosure status of cryptocurrency projects, analyze the existing problems, and try to find solutions from the traditional IPO information disclosure mode, so as to provide references for the information disclosure of crypto projects.
2 Current State of Crypto Project Disclosures
Crypto project disclosure refers to the public sharing of project details, including goals, technology, token utility, team profiles, funding plans, and risks.Projects typically publish these details in whitepapers on their websites and share them via exchanges and community channels.The project side usually publishes the above information in the form of white papers on its official website, and simultaneously publishes it to communication channels such as trading platforms and communities. As the core document of the project, the white paper usually elaborates the important information of the above aspects and is the key information for investors to understand the project.
For investors, transparency in token launches (ICO/IEO) is critical to assessing project viability.At present, the issuance of cryptocurrency projects can be mainly divided into ICO models and IEO models. Initial Coin Offering (ICO) is an initial coin offering, also known as blockchain crowdfunding. Under the ICO model, the issuance of new coins is handled by the project side, and it can raise funds from the public without going through complicated procedures and reviews. However, with the explosion of ICO projects and the rapid formation of bubbles in 2017, investors lost confidence in investment, and a model of issuing new projects through Exchange platforms – IEO (Intial Exchange Offering) model emerged. Under this model, new projects log in to cryptocurrency exchange platforms such as OKX and Binance, and the exchange will review the newly issued cryptocurrency projects in order to improve the quality of the issued projects and enhance investor confidence. New projects that pass the review can be issued on exchanges, known as “on-coin”. The information disclosure of cryptocurrency projects discussed in this paper is the information disclosure under the initial public offering of new projects (including ICO mode and IEO mode, “coin issuance” and “coin loading”).
Below are examples of recent ICO/IEO disclosures:
①Typical ICO projects
| Project | Launch Date | Team | Platform | Disclosure Details |
| TRUMP | 2025-01 | Trump Team | Social Media | Supply, trading volume, and token distribution plan disclosed. |
| PEPU | 2025-01 | Anonymous | ICO Platform | Progress updates, token specs, risks, and roadmap. |
| WEPE | 2025-01 | Anonymous | ICO Platform | Raised $40M in presale with plans for staking/DeFi tools. |
| SAND | 2019-05 | The Sandbox | ICO Platform | Token utility and platform roadmap. |
②Typical IEO projects
| Project | Launch Date | Team | Exchange | Disclosure Gaps |
| Starknet | 2024-12 | Starknet Foundation | Binance/OKX | Allocated 1.8B STRK with vague airdrop criteria. |
| MetaMask | 2024-09 | Consensys | Coinbase/Gemini | DAO governance for token launch but unclear distribution rules. |
| BlockDAG | 2024-07 | BlockDAG Team | Gate.io | Whitepaper covers DAG tech, presale funding, and partial team info. |
| LayerZero | 2024-06 | LayerZero Labs | Binance/Bybit | The project disclosed information on the official website, including the technical basis, issuance principles, audit methods, cooperation with Stargate and liquidity incentive rules, but did not specify the economic model of the token. |
| zkSync | 2024-06 | Matter Labs | Coinbase/Kraken | Before the airdrop, the project disclosed the interactive data (trading volume of the test network and the number of wallet addresses) on the official website and trading platform, but the transparency of information disclosure was questioned due to the “mouse warehouse” dispute. |
| Scroll | 2024-03 | Scroll Team | OKX/Bitfinex | The project side disclosed the technical basis of zero-knowledge proof, the total amount of token issuance and the distribution plan through the official website. |
| Renzo | 2024-01 | Renzo Protocol | Binance Launchpad | The project side disclosed on the trading platform the various rounds of financing, the ezPoints system, the purpose of the funds (ETH re-pledge strategy), and disclosed the technical integration details with EigenLayer. |
3 Problems with information disclosure of cryptocurrency projects
- 1. Inadequate Disclosure Content
Crypto disclosures typically cover team backgrounds, technical details, and roadmaps, with occasional financial data or fund usage plans.However, both ICO and IEO models show systemic deficiencies:In ICOs, projects unilaterally decide what and how to disclose.While investors can request information via platforms like X, projects retain full control over compliance.Traditional IPOs, in contrast, mandate comprehensive disclosures: financials, business plans, risk factors, fund allocations, governance, and regulatory compliance.For IEOs, exchanges impose varying disclosure rules—Binance and OKX, for example, lack unified standards.OKX mandates monthly development/risk updates post-listing, while Binance focuses on periodic reviews.
For investors, insufficient data raises risks: they cannot verify if funds will drive product growth or vanish post-funding.Investors rely on technical specs and fund plans to assess legitimacy—not grand promises.Meme coin investors fear insider dumping fueled by opaque token allocations.Reality: projects often omit critical technical feasibility, risks, or market analyses.Crypto’s decentralization further enables selective disclosures with minimal accountability.
- 2. Lack of Universal Disclosure Standards
A second flaw is that no universal guidelines or self-regulatory norms govern disclosures.Standardized frameworks are critical for industry legitimacy and growth.Unified rules would reduce information asymmetry, stabilize price expectations, and curb volatility.Traditional IPOs, like those on Hong Kong’s exchange, require exhaustive filings—from risk factors to financial audits.False disclosures in IPOs trigger severe legal penalties for issuers and advisors.Crypto projects, however, operate in a regulatory vacuum with no binding standards.This disparity magnifies investor risks.Fragmented rules also let projects “jurisdiction-shop” to evade scrutiny.Standardization is essential for crypto’s evolution into a trusted Web3 financial system.
- 3. Rampant Misinformation
A third challenge: rampant fraud and misleading claims.Projects fabricate endorsements, hype prospects, or inflate techno-economic promises to lure investors.Between 2019–2020, the FTC tracked 570 crypto fraud cases ($7.5M in losses).In 2024, scammers impersonated Hong Kong’s Chief Executive John Lee to promote a meme coin.Insane Lazb artificially boosted LABZ’s market cap from 15M using fake celebrity endorsements.Such schemes erode market integrity and victimize investors.Technical complexity lets projects exploit information gaps, masking weak fundamentals with buzzwords.Absent self-policing or oversight, fraud proliferates unchecked.
- 4. Opaque Token Allocation Practices
Shadow allocations further undermine trust.Teams often pre-allocate tokens to insiders, leaving retail investors holding depreciating assets.Opacity enriches early “whales” while increasing risks for others.zkSync’s 2024 airdrop faced backlash over alleged front-running.Complex tokenomics and insider advantages enable preferential distribution.Weak transparency rules let teams manipulate allocations freely.Undisclosed listing fees (e.g., 3–5% of tokens or 1M) raise further red flags.Such payments create potential for kickbacks and preferential treatment.Investors cannot verify if exchanges favor projects paying hidden fees.These practices distort market fairness to the detriment of retail participants.
- 5. Weak Accounting & Auditing Practices
Reliable accounting and auditing underpin trustworthy disclosures—yet both lag in crypto.Regulatory ambiguity (e.g., inconsistent asset classification) complicates financial reporting.On the one hand,projects may apply divergent metrics, confusing investors.Internal accounting teams often lack crypto expertise, leading to errors.On the other hand,traditional auditors struggle with blockchain’s technical demands, raising questions about methodology.Weak audits result in incomplete or unreliable disclosures.
4 Conclusion
Crypto disclosure flaws reflect a clash between innovation and governance.Unchecked discretion, fake claims, and opaque allocations fuel speculation and hinder long-term growth.The path forward requires bridging crypto’s ethos with investor safeguards.Future analyses will explore adapting traditional disclosure models (e.g., IPO frameworks) to crypto’s unique needs.