Initial coin offerings have been described as 'the biggest scam ever' by former penny-stock broker turned author Jordan Belfort, who wrote 'The Wolf of Wall Street.'

Mr Belfort, who was played by Leonardo DiCaprio in the 2013 film adaptation, said ICOs could 'blow up in so many people's faces', according to the Financial Times.

ICOs involve digital tokens or coins issued to investors by firms, often start-ups, which want to raise funds for their business or a specific project, bypassing banks and venture capitalists, in a similar way to crowdfunding.

Jordan Belfort: The Wolf of Wall Street author has voiced his warnings over ICOs

The boom in ICOs has seen the value of popular cryptocurrencies rocket this year, with the best known Bitcoin rising from $998 on 1 January 2017 to $5,913 today.

The Financial Conduct Authority warned recently that ICOs were 'high-risk' investments since they come with no protection, their value is volatile and can often be linked to illegal schemes or fraud.

Investors are treating the tokens or coins as an investment in the firms issuing them, but are ploughing money into businesses they know little about.

In some cases ICOs 'offer no discernable value at all', the FCA said, warning they are 'very-high, speculative investments' for several reasons.

It added that investors should be prepared for the value of their tokens to drop to zero.

Meanwhile, JP Morgan Chase chief executive Jamie Dimon controversially claimed cryptocurrencies are 'a fraud' and only useful to drug dealers, murderers and people in countries such as North Korea and Venezuela.

Cryptocurrencies such as bitcoin and ethereum have exploded in value this year thanks largely to soaring popularity.

However, Mr Belfort said: 'Everyone and their grandmother wants to jump in right now. I'm not saying there's something wrong with the idea of cryptocurrencies, or even tulip bulbs. It's the people who will then get involved and bastardise the idea.

'It is the biggest scam ever, such a huge gigantic scam that's going to blow up in so many people's faces. It's far worse than anything I was ever doing.'

Mr Belfort spent 22 months in prison after pleading guilty to money-laundering and securities fraud.

For the last decade, he has toured the world as a motivational speaker and recently released new book 'Way of the Wolf.'

He says methods employed by ICO salesmen appeared similar to 'pump and dump' strategies used by boiler-rooms – obtain supply, aggressively promote, leak some into the market to stir interest, often with a celebrity, then flog the rest before a price collapse.

The price of bitcoin has rocketed from just about $1,000 to just under $6,000 this year

Earlier this month, former football manager Harry Redknapp sent a (now deleted) tweet out of the blue promoting one firm.

He said: 'Proper excited about Mobile Cryptocurrency! I'm in, get involved! electroneum.com/ @electroneum #Electroneum.'

In 2017, cryptocurrencies have surged in popularity with some blue chip firms such as BP and Microsoft for example having endorsed ethereum this year.

Global bestseller: Mr Belfort was played by Leonardo DiCaprio in the film version

More than 200 ICOs have raised more than $3billion in the last 10 months according to data. Last month, the Chinese central bank banned ICO funding.

Mr Belfort adds: 'Promoters [of ICOs] are perpetuating a massive scam of the highest order on everyone.

'Probably 85 per cent of people out there don't have bad intentions, but the problem is, if five or 10 per cent are trying to scam you, it's a f***ing disaster.'

Some argue that ICOs are a legitimate mode of raising money and part of a grassroots movement to disrupt big banks and venture funds.

Buyers of tokens are promised access to a future service once it is launched or any profits generated.

Nicholas Gregory, founder and chief executive of blockchain firm CommerceBlock, said: 'Are there scams? Of course.

'But there are scams in every financial system from penny stocks to fraudulent gambling sites.

'It's too easy for critics to point the finger of blame at the technology and not the criminals who exploit every loophole in every kind of commercial environment.

'Investors take a risk by buying into ICOs just as they do buying equities, even though they are not securities. But they are offered far greater transparency.

'There is more they can vet with ICOs because you can look at the source code of the firm you are funding. You can download the product and play with it. In the stock market all you get is a brochure.

'This is why it's more transparent and that's why venture capitalists hate it. The venture capitalist model is all about the one per cent.

'Only a multi-millionaire could invest in Facebook in 2009. With the ICO model, if you and I spot the next Facebook we can get in on it.'