How to detect if an ICO is a scam?

Scams have been there before even the Internet. Google them and you will get results piled up in thousands. Some people make mistakes, some people profit from it. It happens in many fields — banking, electronics; ICO is no exception.

If we are to sort out scams, there are several ways to do it.

Time

Short-term.

Long-term.

Complexity

Simple. They are much like spam — out of thousands receivers out there, some will be gullible enough to fall into scam and give away their money.

Moderate. There are some bright ideas here, there is a ‘team’ and some nice little backstory. But if looked into closely, there will be blurred lines and plot holes to fill.

Complex. It is very hard to tell these scams apart from the authentic.

Intention

When a scam is intentional, founders will already have a plan to run off when their pockets are filled money.

When a scam is unintentional, it could be due to the team’s lack of competence. Sometimes the team cannot deliver their promises because their ability and motivation were lacking or there existed an internal conflict.

To judge an ICO, you can use the ‘4T rule’. See if a project fulfill any of the following:

  • Team
  • Tech
  • Theme
  • Token status

Look into these elements to figure out if the project is real or not.

Search for the team. Search them outside of just Facebook or LinkedIn, look for more social activities from them. If there is no signs of discussions or participation in any groups or projects — these guys are definitely fraud.

Check the advisors of the project for verification — advisors value their reputation and will take action if their name is used wrongly.

Investigate the legality. Look up the address and location that the project registered — you can even try sending an offline mail to the office to double check! Sending a request to the business partners can also bring out proof.

You can even look up the mobile number and e-mail — you may find signs of previous activities in the remote corners of the web, and they will tell you a lot.

It may seem difficult to assess the tech if you don’t have the knowledge. Well this is when we come to forums and professional communities! Just ask them a question, and perhaps ask the project team on their Telegram/Slack to collate the answer. Scammers would try to dodge having to answer.

Speaking of themes, or concepts, see if there’s a market for that sort of product and its target consumers are.

Examine the time it took to get from the concept to prototype or ICO stage.

But the main worry is, how a blockchain project will replace the existing traditional business in this area? If you can’t find any business like this anywhere, it’s a red flag.

Lastly, the token. Following the SEC & MAS reports, everyone knows we can’t just put out ‘randomcoins’. Therefore, if a token is not backed by anything (i.e. bonus, ecosystem, company share, etc.), its issuer is probably a scam.

ICO is a new business and new business always means high risks. You don’t need special or complex technologies or deep-mined data to detect most frauds. A bit of patience and investigation will protect your investment well.

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