$US7 million was stolen from investors after an initial coin offering was hacked

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The hottest trend in cryptocurrency was just dealt a serious blow.

On Monday, cryptocurrency trading startup CoinDash reported its site was hacked during an initial coin offering, according to reporting from Bloomberg’s Alexandria Arnold.

Approximately $US500 million has been raised by the new cryptocurrency-based fundraising method, according to Business Insider’s Oscar Williams-Grut. It is a trend that has sparked excitement across Wall Street.

A number of startups have used ICOs to raise capital. Gnosis, a prediction market for digital currency Ethereum, raised $US12 million in just 10 minutes in April. Brave, a new web browser startup set up by the founder of Mozilla, made that look pedestrian, raising $US35 million in less than 30 seconds selling “Basic Attention Tokens” last month.

But the hack, which redirected $US7 million worth of ether tokens, provides a reason for folks to be sceptical of the red-hot investment vehicle.

“Investors had been instructed to pay with ethereum and send funds to the token sale’s smart contact address. In an email, CoinDash said it appeared that the sending address was hacked and changed to a fraudulent address,” Bloomberg’s Arnold wrote.

Wall Street sceptics were quick to cite the rapid appreciation of cryptocurrencies like bitcoin and ether tokens as one reason why intial coin offerings are a bad concept. David Rutter, a Wall Street vet who heads R3CEV, a fintech startup, previously told Business Insider.

“There’s approximately 200 coins now. If you had an analyst look at it, this is a typical kind of bubble, in that folks that have made money in bitcoin are trying to parlay that into other kinds of cryptocurrencies and now they’re moving out of those.”

CoinDash, however, is resolute that it will overcome this hiccup.

“This was a damaging event to both our contributors and our company but it is surely not the end of our project,” the firm said in a statement. “We are looking into the security breach and will update you all as soon as possible about the findings.”

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