How to Spot a Potential ICO Scam

March 19, 2018


While the ICO ecosystem may be a multi-billion dollar industry, it is still largely unregulated. This lack of regulation has allowed much of the market to be plagued by fraudulent platforms and “exit scams” globally, leaving regulatory bodies around the world scrambling to develop a functional framework for control without oppressing advancements in technology. The most important advice from the team of Quantaloop is buyer beware, or in this case, donate or invest with caution. Many of these scams operate in a similar manner to multi-level marketing or Ponzi schemes.

According to Cointelegraph & Cryptoslate: There are some major red flags which are common for most of these campaigns and by detecting which you can avoid potentially dangerous companies:

  • The developers of the project are either anonymous or unknown to anyone in the community. If the people behind an ICO don’t put their reputation on the line, they are more likely to feel safe while pulling a scam.
  • Poor online presence. A legitimate ICO will provide a wide range of social media links and places in which investors can interact with developers. Never invest in an initial coin offering that has an anonymous team, regardless of justification. If you spot an ICO with an anonymous team, it’s most definitely a scam.
  • No escrow wallet for contributions. If all keys to the contributors’ donations are concentrated in the hands of the owners of a project, nothing is stopping them from running away with the money.
  • Unrealistic/unclear goals. When a project doesn’t have a clear-cut, realistic roadmap, it means that the people behind it don’t know what they’re doing, at best. At worst, they don’t really care because they aren’t actually going to do anything.
  • Lack of transparency. Today, showing work-in-progress stages of your project to the audience is considered an industry standard in crypto. If the developers don’t release code snippets, demo/beta versions of their product, behind the scenes videos or other kinds of reports on their progress, it is possible that they don’t have anything to show at all.
  • Guaranteed profits: Of all the red flags that identify a potential scam ICO, guaranteed profits is the most obvious. There are no certainties in the blockchain ecosystem, and no proven, reliable, or guaranteed methods of generating profits.
  • Solutionism: While blockchain technology may be highly disruptive, it’s not the ultimate solution to every single problem in existence.
  • Unbalanced token allocations: If an initial coin offering favors the development team or founders with an imbalanced amount of tokens, then it’s worth considering whether the project is attempting to maximize personal gain for team members as opposed to maintaining the stability of the proposed blockchain network over the long term.
  • No roadmap or realistic project roadmaps: Initial coin offerings will generally provide potential investors with a detailed list of what they have achieved thus far in the development of their project, as well as what they plan to achieve, in the form of a road map. No roadmap, no code commits to a repository, and a poorly-written or nonexistent white paper are the unholy trinity of a fraudulent initial coin offering.

If you have found an ICO campaign which displays any of the above signs, and, especially, any combination of them, it is best to avoid contributing any money to it. The best tool you can have before investing in an ICO is common sense. Use it whenever you invest.

Source: – 7 key signs of an ICO ScamICO Explained by Cointelegraph