ICO SCAMS and Investors

5 Warning Signs Peculiar To Scam ICOs

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Bearing the brunt of bad market conditions and falling victim to scam ICOs tops the list of possible setbacks a trader, investor or any crypto enthusiast can experience. While the former is inevitable due to market volatility, the latter has created an unfriendly atmosphere in the industry, causing a massive loss of investor confidence – alongside billions of dollars, of course.

According to CipherTrace, approximately $3.1billion has been stolen through exit scams while another $874million was lost due to misappropriation.

Fraudulent scam ICOs and innocent investors

The incessant issue of fraudulent ICOs and rogue exchange operators warrants investors to be on their A-game while vetting. But apparently, these guys are likewise unrelenting in their bid to swindle unsuspecting investors.

An extensive look into the biggest cryptocurrency heists and exit scams reveals recurring patterns and red flags in the operation of these scammers, which are often ignored by investors. This article highlights five loopholes through which investors can identify likely fraudulent cryptocurrency ICOs.

Scam ICOs and cryptocurrency investors

1. Fake, non-existent team members

Scam ICOs parade non-existent individuals or clones of existing people as core team members, often brandishing them with faux portfolios to lure investors. It is generally advisable to look up the profiles of team members on LinkedIn before investing. If they can’t be found, then its best to discard the idea of investing. If they do exist, you should check the profile images to be sure they are not stock images with watermarks (e.g shutterstock, gettyimages etc). Also check for profile completeness, activity, and if the work history adds up. While this is not the sole benchmark for authenticity, sparring some minutes to do your due diligence can save you future troubles.

2. Unrealistic Objectives

A whitepaper is a document that contains the objectives of an ICO in written form. It is a form of proposal that best explains the goals of a project to prospective investors. If you’re considering investing in one, it is worth reading through the ICO’s whitepaper before parting with your hard earned money.

Whitepaper and ICO scam

Many projects look good on paper, but are nowhere near feasible while others are straight up laughable. The project’s feasibility and sustainability on the long run should be of paramount interest to investors. Some red flags common to scam projects are frequent typos in whitepaper, vagueness and murkiness in stating objectives, shady fund and token allocation etc.

3. Promise of fixed return on investment

The trick that never gets old.The average investor’s “get rich quick” mentality is the most commonly devised weapon of scam ICOs. In 2018, Modern Tech launched Pincoin and iFan, promising investors a whopping 48 percent monthly return plus 8 percent for every referral. They successfully raised $660 million from 32,000 investors before absconding months later. Also, Bitconnect and Plexcoin are two other high profile ICO scams that disappeared with funds after promising astronomical return on investment.

In the wake of events, the need to sensitize investors is at an all-time high. Everyone should know that token prices are solely determined by market conditions, not baseless predictions and promises by fraudsters. Also, ICOs are unregulated, which makes it almost impossible for them to be held accountable. Investors must factor this before making investment decisions.

4. Zero transparency and accountability

Lack of transparency and clarity often hints a bird of ill omen. When an ICO refuses to be transparent about fundraising goals such as soft cap, hard cap and amount raised, consider making an abrupt turn. As a rule of thumb, if an ICO receives funds exceeding its hard cap, they should return the surplus to investors. Therefore, if these figures are not explicitly stated, there’s a probability of corruption lurking behind. 

A detailed breakdown of how raised funds would be spent should be made public to investors alongside token allocation, lock details and strategies put in place to protect investors. Scam ICOs often keep these informations close to their chest to ease implementation of their nefarious agendas.

5.  Unresponsive and inactive social media channels

Building engagement and responding to inquiries from existing and potential investors is a necessity that genuine ICOs don’t overlook. Furthermore, it is advisable to check social media channels for activity and responsiveness before throwing funds into any ICO. Many scam ICOs have dormant pages with few followers while some don’t even go through the stress of opening any.

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Innovative applications of blockchain technology and cryptocurrencies are poised to revolutionize our world in the coming years. Unfortunately, failed projects, exit scams and monumental heists have placed the industry in bad light. 

Enlightening investors is our best bet towards winning this battle and ensuring that this disruptive technology lives up to its billing. 

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Daniel Okorafor
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Daniel Okorafor

Passionate about modern disruptive technologies and their impact on diverse aspects of human life. He has a wealth of experience in blockchain content creation and community management. Also he has written topnotch article reviews and whitepapers for several STOs and ICOs.
Daniel Okorafor
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