Initial Coin Offerings: How To Tell If An ICO Is A Fraud

Crime, ICO News, Investing, Opinion | January 19, 2019 By:

What is an ICO? It’s basically an IPO with cryptocurrencies. If you don’t know IPO as well, imagine a company selling its stock to the general public for the first time. During this time, most of the shares are sold at a lower price, so that people actually buy it, and the company can get some funding in the future. However, it can take a drastically bad turn, as the company fails to implement all of the innovations it wanted, from those investments and ultimately falls flat on its face. At that moment, everybody who invested during the IPO suffers losses. The same thing goes with ICOs, however, they can not only be unsuccessful but also complete scams as well.

In fact, somewhere around 80% of all ICOs turn out to be a fraud. People are indeed getting more accustomed to differentiating a good ICO from a bad one, but there are still some who fall victim to these companies. Let’s find out how to avoid an ICO fraud.

How to know an ICO is legit

In the beginning, when the ICO scams were rampant, even the legit companies started to suffer from all the bad sentiment. If it acts like a duck and sounds like a duck, you know the rest. The scam ICOs were able to masterfully imitate actual legit ICOs, therefore pretty much everybody was starting to stay away from it.

The most common way to find out more about the ICO is to see what other people are talking about it. If there are any signs of scams or some shady activity. There are a lot of websites that list these ICOs by rank, but in most cases, they’re paid to do so, therefore some caution will be required here as well. Here are some dead giveaways of a scam ICO.

Faulty website

A website like in any other case is the front page of the company. Pretty much everything about them can be found out there. But as soon as you see that the company didn’t really pay much attention to the website, you can immediately tell that something shady is going on. But there are also problems connected here. Some scams may actually invest heavily in their websites, but thankfully there are other ways of determining scams as well.

In most cases what would be a good giveaway from a website is:

  • Broken links
  • Grammar issues
  • Limited information
  • No documentation

A team of people that don’t exist

No matter if a company is a fraud or legit, they need to make sure to show you the team behind the project. You need to know who will be working on it, developing it and in the grand scheme of things, running it. Therefore pretty much every crypto company displays their developers with high regard. Linking to their social media pages like Linkedin, and also their portfolios on Github.

What fraudster ICOs usually do is, come up with fake names, create fake accounts on Facebook and other social media websites, and fill the portfolios with multiple fake projects. The best way to expose them is to contact their so-called “previous employers” to see whether or not they truly worked there. You can also “right-click” on the photos and click “search Google for image” and in most cases, they turn out to be stock images. You may find it baffling as to how careless these scams may be. They never expect somebody to go the extra mile for security, and that’s their biggest weakness.

A copied Whitepaper

A Whitepaper is pretty much all of the information about the company. Therefore it should never be copied from somebody else, as it desperately needs to be original. You may think that some crypto projects are similar, but not at a point where they are indistinguishable.

Another feature that the Whitepaper needs to have is readability. This means that no matter how good your English language is, you will still understand what the project is about. If the whitepaper itself contains errors and vague information, it should immediately be a topic of alarm.

The company has no clear goals

There must always be a specific goal for the company. In most cases, the crypto firms that are just starting up have a goal of, turning an industry towards crypto. The perfect example is DENT, where they tried to convert most of the mobile data services towards cryptocurrencies.

If the ICO does not claim to have a perfectly reasonable goal, for example providing extra services in some type of industry, then you need to stay away. These types of ICOs are known to be a scam but in a different way. They release the coins, with no clear goal. Try to make it trending, boost it artificially, cash out and just run away as the coin plummets to the ground. Sure they may not outright steal the money, but in the end game, they still do.

Unrealistic investment plans

As already mentioned the whitepaper needs to describe the project in great detail. By great detail, I mean every single stage of the development. The company doesn’t just magically appear. There are steps connected to the creation, and if the whitepaper doesn’t showcase them, then you can make sure that those steps will be bypassed just for the cash grab.

When you are reading the whitepaper, make sure to notice whether or not the developers themselves, have committed to holding onto the tokens for a long time. As I’m pretty sure you’re aware that if the developer sells them, the price falls rapidly.


Also, find out about the investment stages. Where the accumulated funds will go. Firstly, make sure that it doesn’t go into the pockets of the team, it needs to be used for marketing, and development.

No authorization

Every ICO has a company that is conducting it. Therefore it sometimes is quite easy to check them at the place they are registered at. They should have the same name on their registration, or at least the parent company name. If there is no such thing, you can make sure that it is indeed a scam.

Some of the best places to be registered at as a crypto company are, Malta, Gibraltar, and Switzerland. If the company is registered there, then in most cases you can rest easy.

Is that it?

In the grand scheme of things yes, this is pretty much it. I know it may sound like common sense, and that’s because it is indeed common sense. Most of the fraud ICOs don’t really take into account that people will take time off of their daily chores and conduct quality research. Therefore they don’t even bother hiding some of the aspects.

All in all, follow the pattern I showed you and you’re guaranteed to avoid a scam.

This story originally appeared in Forexnewsnow