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Best Ways To Identify A Genuine ICO Scam and Fake Cryptocurrency

ICO Scam

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In this article, you’ll learn the basics of spotting scams and fraud in cryptocurrency and what to watch out for.

ICOs (Initial Coin Offerings) are an instigative new way of fundraising. They’re believed to have the eventuality to replace the established adventure capital-driven backing for startups.

Still, there are also a couple of downsides to this development. First, investing in ICOs is parlous (ICO Scam). Swindles are frequent, and occasionally, it’s tough to spot dubious systems at first glance.

Therefore many words of caution: To make sure you invest in worthwhile systems only, learn to be apprehensive of certain red flags that indicate that you should do veritably precisely with your investment, if at all.

What exactly are ICOs?

The acronym ICO stands for Initial Coin Offerings. These are regarded as “popular fundraising methods” employed by businesses and startups. An ICO is a way for organizations that want to make a new coin, app, or service to raise money.

The cryptocurrency industry’s equivalent to an IPO is an ICO. Still, the significant difference between the two is that an IPO is typically for well-established companies, whereas an ICO generally is for the young and risky.

Although some ICOs have provided massive returns to investors, many others have proven to be scams. Scams involving initial coin offerings (ICOs) are the black sheep of the crypto-asset industry, and they come in all shapes and sizes.


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Scam Types of Initial Coin Offerings

Now that we’ve established what ICOs are let’s look at some of their subcategories.

scams

The Exit Scam

An exit scam is a fraudulent operation organized by unscrupulous cryptocurrency promoters who collect funds for an ICO and then abruptly disappear without providing investors with any information. It was reported in 2018 that over $100 million in funds contributed to ICOs were stolen as part of an exit scam.

Bounty Schemes

Bounties have even made their way into the cryptocurrency ecosystem, and the concept has been incorporated into many ICO projects. Another type of ICO scam is the bounty scam. In this case, the ICO fails to pay out financial rewards promised to promoters for PR activities.

Scam Exchange

An “exchange scam” occurs when developers intend to deceive investors into preferring to launch their ICO on a bogus exchange.

Scam of White Paper Plagiarism

Another type of ICO scam is the white paper plagiarism scam, in which the scammer attempts to copy the white paper of a promising ICO before launching it under a similar or different name.

URL Fraud

Another standard method is to create fake websites that look like ICOs and instruct users to deposit coins into a compromised wallet. Unfortunately, due to such counterfeit websites, naive investors who are unaware of the authentic websites are sometimes duped and lose their ICOs.

The Ponzi Scheme

Organizers of a Ponzi scheme solicit new investors by promising to invest funds in opportunities that will generate high returns with little or no risk. Organizers of this scheme promise high return later to attract more investors. Rather than engaging in legal investment activity, the deceptive actors draw new money to make promised payments to earlier investors and convert some of the invested capital for personal use.

How to Spot ICO Scams

Numerous methods are available to help you avoid fraudulent ICOs and sketchy coins. Among them are the following:

Read the Whitepaper

To avoid ICO scams, read the project’s whitepaper, as it will give you a better understanding of everything. Any blockchain-related project’s whitepaper lays out the background, goals, strategy, concerns, financial models, SWOT analysis, and implementation timeline; thus, companies that do not provide whitepapers should be avoided at all costs.

Understand the Team Completely

Before making any investments, the best safeguard is to thoroughly research the project’s team members. This is critical because the administrative and development teams are any ICO’s most important success factors. Examine their profiles on social media platforms like LinkedIn and others. Before deciding whether or not the unit is genuine, it is necessary to investigate its credentials. Investigate whether the development team has the expertise that they claim to have.

Consider Promises and Trust Your Gut

Evaluating promises is an essential step. Before you choose and proceed with any ICO team, assess their pledges. If everything appears in order, you can begin investing; however, if you have a negative feeling about an ICO, it is most likely because it is. Follow your instincts and then decide whether or not to invest.

Checking the GitHub repositories is another method for identifying ICO scams.

So, what is the most prominent ICO scam?

Our screening revealed that the most common type of scam is “phishing and fraud,” in which users receive spam emails, suspicious links, popups, requests for personal and financial information, errors on withdrawals, pending withdrawals, balances disappearing from wallets, and other dysfunctional operations.

Finally, we discovered that if an ICO business project turns out to be a scam, we can expect to lose $54.1 million, three times the general sample average of $17.58 million.

To summarise, due to a lack of regulation, developers and promoters can use various strategies to deceive investors. The amount of money involved in this new, emerging market is staggering. Our findings have significant implications, including the need for governments and regulatory agencies to implement ICO market regulations to protect investors from severe losses.

Final Thoughts

Due to a lack of regulation, developers can use a variety of tactics to deceive investors; therefore, with the current craze, caution and due diligence are required before investing in any ICO. Before investing, it is best to invest your time, be self-aware, and conduct your research.

If you want to learn more about ICOs and begin investing, you can join Blockchain Council and become a Certified Cryptocurrency Expert/Trader.

SDLC is a great place to get instant Blockchain Technology updates and learn more about online Blockchain Certifications.

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