ICOs have been prevalent among investors since 2017. The top ICOs are capable of raising millions of dollars in a few days with a no strings attached policy, essentially drawing significant attention from fraudsters and scammers.
These people view ICOs as a quick and straightforward way to generate a substantial income. There are two main ways to execute ICO scams: Fake ICOs and Hijacked ICOs.
Fake ICOs consists of counterfeit employees providing spurious claims. The ICO initiators have no plans of developing projects and satisfying their obligation to the investors.
Hijacked ICOs use either one or a mix of phishing strategies to lure investors to transport their coins to a false wallet address supervised by the scammers during a project’s public token sale.
There are five ways to spot an ICO scam:
1) Assuring Lofty Returns
This approach might be the most significant indicator of fraud. Every scammer shares a common goal, to convince you that their ICO will offer guaranteed towering returns.
Huge returns are possible in the ICO environment, but no issuer can ever honestly guarantee it. Promising huge returns is very unethical. On top of that, the SEC has made it illegal to ensure investment returns to the US citizens.
Genuine projects will never advertise guarantee returns. These projects will proclaim the practicality of their ICO as a path to mass adoption. The value of cryptocurrencies grows because of the people’s desire to use them. This desire results in rising demand.
2) Unreliable Use-Case
It is common knowledge that adoption is crucial for cryptocurrency success. However, a decentralised solution may not be enough to benefit every problem.
Do thorough research into the whitepaper and check whether the team has examined the target market and revealed why their ICO is more beneficial than the others. Many ICOs declare that it is a decentralising industry that depends on technology that is not even ready for the market.
The first indication of a scam is the vagueness in the whitepaper relating to the project objective and the methods used by the team to achieve the benchmarks. In some cases, the company undertaking the project will not issue any whitepaper.
During ICOs, you are mainly investing in concepts that emanate from the project whitepaper. If a whitepaper does not exist, then you are mostly spending in nothing.
A legitimate ICO project will provide project updates regularly via their social media channels and blogs. The project team should be open about their development and difficulties.
3) Not providing the product launch date
It is essential for any venture to have a healthy business plan and that includes blockchain projects. This business plan should consist of a well planned and reasonable timeline for the go-live event of the product.
You should avoid any project whose roadmap doesn’t provide an estimated launch date or does not even have a roadmap. Fraudsters usually do not plan that far ahead and are typically limited to receiving your ICO or cryptocurrency in their wallets.
Never share your cryptocurrency details unless the company undertaking the project provide their timelines.
4) Listen to the people
If there are a large number of people not affiliated with the project stating that the ICO is a scam, then they are probably right most of the time. You have to listen to the people sometimes.
Any good project should have a supportive and reliable community, without which would be very difficult to succeed.
5) Information Deficiency
Never believe any ICO projects that do not have any registered real employees or individuals. The team members and investors of any authentic ICO project should have an active social profile capable of backing up their work history and their identities.
It is also recommended to look into the social profiles of the project’s advisors to know whether they are genuine or fake. If you are unable to find any public information regarding the employee’s and advisors’ identities or work history, then avoid them entirely.
Since they are handling millions worth of currency from investors, if they refuse to show any identification, then assume they are scammers.