Home arrow Article arrow Article Detail

How to Save Yourself from a Scam ICO

Profile Image

Crypto Business World Follow


Nov, 09 2018

Nov, 09 2018

likes | comments 0

Article Image

There are several mechanisms and technologies being implemented by blockchain-enabled systems to provide users with the privacy they expect. Transparent computing is possible by making use of a public ledger and a peer-to-peer decentralized network. Blockchains are essentially distributed ledger systems. The database is not centralized, but divided into several parts and stored in an infinite number of places (potentially). This ensures that a blockchain environment is not a single point of failure. All transactions are written into this ledger and these environments ensure that no manipulation takes place. While other forms of technology may not provide the privacy we seek, blockchain environments may finally be able to allow users to be in control of their own information, and ensure its security. There are still several security breaches and privacy issues, but the future is bright. The major problem with blockchain technology is that there is no regulatory committee to govern blockchains. This has led to several scams.

     Initial coin offerings (ICOs) present a financial, blockchain-based business model. They generate capital through crowdfunding to kick-start the start-up process. Both the investors and the developers of the project are benefited by this process as investors reap huge profits as the project grows, while developers are granted funds to aid in the development of their decentralized platforms. The number of ICOs in the market is immense and nearly 5-6 new ICOs are finding their way into the market on a daily basis. While the ICO ecosystem is billion dollar industry, it has its set of flaws. As is the case with blockchain technology, there is no committee to regulate and govern blockchain environments. There are several cases of ICO exit scams which have left investors in the cold and penniless. The market is plagued with numerous fraudulent platforms and it is becoming more common by the day.

     It is necessary to conduct a quality Due Diligence for each and every ICO one may wish to invest in. While this may not be possible for a majority of investors due to a lack of resources, it is not tough to spot a fraudulent ICO. Experienced investors may hire a specialist to research and prepare reports on potential ICOs. There reports are detailed and curtail all the risks which may be involved in investing in a particular ICO. There are certain institutions like Crypto Asset Rating Inc. which provides its subscribers with independent ratings for several ICOs. Scam ICOs may succeed in separating the generated capital from investors and absconding, but it is usually not that tough to spot a fake ICO from a bunch of authentic ones. There are several signs that an ICO may be a scam and each investor should access an ICO on the basis of a set of criteria. If an ICO looks too good to be true, steer clear! Common sense is very important when investing in any profitable opportunity. Maintain a sceptical approach and do not fall for any impossible scheme which seems amazingly possible. Here are a few tips which should help you save yourself from a scam ICO!

ICOs with a Poor Online Presence and Following

     An authentic initial coin offering will provide investors with a detailed list of their team. All ICOs generally display the names of their founders, advisors, developers and other members integral to its creation and maintenance. There are several ICOs which create a fake list of team members which seem authentic. Scam ICOs understand that investors will look at the team page of an ICO and make a decision based on the credibility of their team members. These scam ICOs go to great lengths to create a list of team members which seem credible. If the list of team members is credible and the online presence is low, it may mean that the ICO is credible. There are ICOs like the ICO of Crypto Asset Rating Inc. which has an authentic and qualified team yet has a poor online presence. This ICO is focussed on delivering results and does need to sell its token to audiences on social media as the product speaks for itself. They would rather spend time and energy in the betterment of the project.

     Investors are advised to conduct a detailed research procedure and look through the Facebook page of the ICO and the LinkedIn page of the founder/founders and other important team members. Be careful while accessing the authenticity of an ICO on the basis of the LinkedIn pages of their team members. There are several scam ICOs that have created fake LinkedIn pages to attract audiences. AriseBank is an ICO that comes to mind. It has been closed by the SEC after a 600 million USD fraud. The CEO, Jared Rice created a fake LinkedIn page according to which he is also the CEO of a Dallas marketing firm, Dotoji. The address provided for the firm is a residential home in Dallas!


If the profile of the founders seems to be a scam, steer clear. Empire Card is an ICO which used the image of Sabine de Poncins (a French actress) as their CEO under the name of Patricia Harrison. Never invest in an ICO with an anonymous team!

There is No Such Thing as Guaranteed Profit

     If an ICO guarantees profits, it is most likely a scam. If there was a guaranteed method of generating profits on blockchain systems, everyone would be a millionaire. There are several platforms which promise automated trading bots that eventually rake in massive amounts of money. Other platforms promise a return to investors for staking in their coin. The Proof of Stake consensus is growing in popularity and the latter mentioned method of profit raking is more prevalent. Of the many examples of such fraudulent ICOs, BitConnect strikes the mind and is a well-known instance of an ICO guaranteeing profits. There scheme turned out to be a Ponzi scheme. Remember, there are no certainties and no proven or reliable methods to sustain profits in blockchain environments.

Empty Code Repository ICOs are a Strict No!

     Most ICOs have an open source code. This allows investors to access the code and check it out. This is usually provided through a repository link which makes it possible for potential investors to take a look. An empty code repository hints at the ICO not providing for anything worth taking note of. Although many investors may not have the knowledge to access the code being used, some do. Investors with programming knowledge can track the development of the platform and gauge its validity. The underlying technology needs to checked and validated. There are several forums like Reddit which provide the ethos of a project and enable investors to get a working idea of the project. An active repository receiving regular updates generally suffices an investor’s curiosity.

A Fraudulent, Bad, or Plagiarized White Paper is a Strict No! Stay Away from Such Projects!

     An initial coin offering sans a whitepaper is most definitely a scam! A whitepaper describes the entirety of the project details, from what the project plans to achieve, to what it offers and a technical breakdown of the various aspects of the platform. However, providing a whitepaper is not enough. There are several fake ICOs which copy the whitepaper of other ICOs or implement the same concepts and just change the structure of the wording. Other ICOs may write a whitepaper just for the sake of it and not make any sense. Just providing a whitepaper is not enough and investors must read through the document thoroughly to establish its legitimacy. The DADI ICO was a scam ICO and had copied the whitepaper of the SONM ICO. Interestingly, this was done by the creator the SONM ICO himself! One must be very careful and must establish the sanctity of an ICO whitepaper before investing in it.

Shady Pre-mining Techniques May Hint at Fraud

     The supply schedule of tokens must be reviewed and cross-referenced to establish the authenticity of a project. The true intent of project leaders can be gauged by this. The mining structure of a project does not necessarily hint at an ICO being a fraud but it does certainly assess the legitimacy of the project and its future prospects. Pre-mining techniques are used to reward contributors to the project and large amounts of tokens are generally reserved for this purpose. While this may seem fair, if the proportion of coins reserved for this purpose seems to be too large, it is a cause for concern.

     If an initial coin offering favours the development team and a large amount of tokens is reserved for them and the founders of the project, it is more likely than not that the team is looking to extract personal gain from the project. The stability of a project in the long term depends on factors like these and this is often overlooked by investors. The Paycoin ICO reserved a majority of tokens for their founder and development team and this resulted in a scam worth 9 million USD. It is extremely important to access the authencity of an ICO on the basis of pre-mining allocation.

Projects without a Roadmap or Unrealistic Roadmaps are more likely than not of being a Fraud

     A roadmap generally encompasses the work of the development team, what they have achieved so far, what they plan to do in the future and their eventual goal, along with certain updates. If a project does not have a roadmap, it is likely to be a fraud. A roadmap shows the direction in which an ICO plans to head in and sans one, it can be expected that the team plans to abscond after obtaining profits. As mentioned before, an ICO which seems too good to be true probably falls into this this category. ICOs without a whitepaper, roadmap or an empty repository are likely to be a fraud. There are some ICOs which claim to be working on a roadmap but never come up with one. Never trust a platform which reeks of fraud, as no one can save you if you transact virtually on the internet. An unrealistic roadmap which guarantees profits may be a fake as well. Assess the content of the roadmap carefully before making any decision.


     Unfortunately, the market has seen hundreds of cases of fraud and absconding parties. The lack of regulation has hit several investors hard. The above listed methods will help an investor differentiate between authentic and scam ICOs. Although one can guarantee this, there are other methods to help an investor remove the wrong from the right. An unbiased rating system will serve the purpose of segregating fraudulent companies from authentic ones.

     Crypto Asset Rating Inc. (CAR) is a United States based cryptocurrency asset rating agency. They have created an algorithm to determine the rating of cryptocurrency asset issuing companies. Rating a project on the basis of the risks involved in investing in it and the long term scope of the project is helpful. Investors could make use of this rating to determine which projects are worth investing in. Although this does not serve as a cornerstone around which investors should create an investment plan, or abide to, it is certainly helpful. It does not guarantee the competence of an investment opportunity but guarantees its sanctity. In the end use your common sense and do no trust your heart! Do what your mind says after conducting an extensive research procedure and you should be fine.

#securities #tokenization #smarts #investments #d #CryptoAssetRating #rating #blockchain #ICO #ANSA #AND #STO #securitytoken #howto #ICOrating

likes | comments 0

Profile Image

Crypto Business World

CBW - External Analyst


Data Centre Construction - World First artificial intelligence AI-Tech Utility Token
DeFi Protocol SeaSwapSui Steals $32k From Investors

It was discovered by CeriK Alert that the decentralized exchange platform SeaSwap has scammed its users out of around $32,000 worth of SUI tokens;

Disclaimer: The information is for informational purposes only.​ This advertisement does not constitute financial advice or any other advice. You should consult with a financial professional to determine what may be best for your individual needs. None of the information and/or content available through this advertisement is intended as an offer or solicitation of an offer to buy or sell, or as a recommendation, endorsement, or sponsorship of any company, financial product, security or commodity. To the maximum extent permitted by law, we disclaim any and all liability in the event any information, commentary, analysis, opinions, advice and/or recommendations prove to be inaccurate, incomplete or unreliable or result in any investment or other losses. In Making the investment decision, investors must rely on their own examination of the issuer and the terms of the offerings, including the merits and risks involved. Investments are speculative, illiquid, and involve a high degree of risk , including the possible loss of investment.