5 Tips for Identifying and Avoiding ICO Scams

Tips for Identifying and Avoiding ICO Scams

October 27, 2018 – ICO (Initial Coin Offering) is an unregulated way to gain profit and raise capital for start-up cryptocurrency venture. If you are not professional in this sphere, you should understand how to avoid scams and protect yourself from losing your money, before making any investments. Let’s look through the following tips:

Weak White Paper or Website

When starting a new ICO campaign, a company will distribute a white paper and provide direction to its website outlining its project.

Legitimate startups should give reasons why investors should invest in their project and what they will gain from that. Therefore, investors should have thorough research done on the company for avoiding scams.

Analyze white paper or website critically as you look for fraud information or statements. Take a look at credentials of current investors that might be used to motivate more investment.

If you came across good description of the company, its project and vision takes your attention. Bancor and Wanchain, whose websites focus on architecture and technology, are examples.

If on the landing page you come across a token sale supported by “make money,” close that page as it is wasting your time. Always remember the infamous coin that promised investors up to 40 per cents monthly income before it turned out to be one of the biggest scams in cryptocurrency history.

Consider official media accounts of the ICO. It is important to see not only the number of followers, but also how lively their discussions are and what topics of their conversations are. Inactive group of 60,000 members looks suspicious, so do utopian discussions about the big sums of money that people make by investing this token.

Scammers may fail to make a website or to publish white paper to market ICO. Again, if website or white paper is weak and inconclusive, or entirely not there, it is advisable to clear such ICO.

Absence of Team Members or Named Developers

White paper should provide details of the venture team and give credibility to the project and build trust. Confirm legitimacy of developers and individual team members by carrying out a research.

As you examine the ICO team give your attention to these two things. One is do they have their own accounts on major social media and if they do, do they add new posts on regular basis or are their accounts abandoned. Secondly take time to find more information about people who are working on this project now and their backgrounds. It is essential because if you find out that at least one of the team members has a track record of being involved in some sort of scam you prefer not to risk.

Valid ICOs always provide a communication channel between investors and team members so that investors can learn more on offering. Scammers fear naming anyone associated with their ICO since they want evade accountability. If white paper or website does not list developers’ and team members’ names then most probably it is a scam.

No Clear Roadmap

ICOs should give detailed information of development and funding goals to their investors together with vision and mission of the company. If this is not realized, it indicates that people behind the ICO are after profit before folding the venture.

Skewed Mining Structure

If ICO team members reserve a significant amount of pre-mined tokens for themselves, it should show that the project is started for short-term financial gain.

Pre-mining generates tokens for small group before they are sold to the public. This usually happens to reward early investors and developers. But new investors should be considered if pre-mine tokens are high.

Uncapped Fundraising Goal

Cryptocurrencies are normally created with the aim of raising capital to fund a project and launch its growth. This aim should be clearly stated in the white paper or the website of the company.

Launching an ICO that lacks funding goals is a sign that the aim of the ICO is not legitimate and may be used to scam investors.


If ICOs is used effectively then it can be a cost-effective and quick way to generate start-up capital. This could be helpful to companies as they grow rapidly and allow investors to gain significant profits.

Marketers and investors are to weigh risks associated with ICOs against prospects to make fast returns. Associated risks exclude investors who cannot sustain losses. Finally, ICO may be really high profitable investment if marketers do their work and avoid these signs of scams.

When considering the possibility to invest money in ICO, no one can fully protect oneself. However these signs can help you reveal a scam: a lot about high return on your capital, no core team representative or one of team members who has been involved in fraud, large but inactive social community and unfavourable comments on various internet resources.

Author: Diana Yaremenko

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