5 signs of an ICO scam

If you have been actively involved in the fintech space recently, you must have heard of the statement “If you invest in a few ICOs, you will be a millionaire in no time!” Have you been moved away with this advice lately?

Has this created the urge in you to take up the advice and go forward with making an investment in an ICO? Well, our experts suggest you should slow down, analyze, research, and only then make an investment in any ICO offering.

On the higher level, the ICO (Initial Coin Offering) is a specialized fundraising technique in which the new projects try to sell the underlying crypto tokens in exchange for obtaining an early investment or capital. Usually compared to the other famous mainstream as IPO (Initial Public Offering), the ICOs are known to democratize the overall fundraising process. It, thus, serves to be a major crowdfunding tool in the current global business scenario. While it turns out to be a relatively new phenomenon in the global business scenario, the token sales through the ICO mechanism are rapidly gaining impetus –aimed at empowering the global groups of investors towards funding the upcoming generation of newbie companies & organizations.

One of the biggest issues with ICO is that as the process gains immense public attention, most of it tends to be unregulated. There are several fraudulent parties and entrepreneurs involved who aim at exploiting the system and the companies looking for funds. As a rule, companies raise funds for their wallets and use exchange platforms to convert them into fiat money. It is almost impossible to track the movement of funds into the blockchain network.

When you are considering investing in ICO, here are some red flags to watch out for:

  1. The Landing Page: The first glance at the landing page of the given ICO service can say it all. You must analyze the kind of information available on the site’s landing page that can reveal a lot about the overall credibility & authenticity of the particular ICO service. If you come across a detailed description of the given company along with the ongoing projects, vision, about us section, and other vital parameters, then these are the aspects that should catch your attention.


If you observe that the landing page of the service provider is speaking about some token sale being supported by the phrases “grow money” or “make money,” then you should simply stop wasting your time on the site and close the tab. One of the leading examples of such an instance is that of the infamous ICO offering named Pincoin which had promised its investors around 40 percent of profits on a monthly basis before it turned out to be one of the biggest scams in the ICO history.


  1. Analyze the Product: Once you have gone through the landing page of the site, critically analyzing the product offered by the ICO service provider is your next task. The first query that you need to raise here is whether or not the given project needs Blockchain. If the particular startup in which you are investing would require Blockchain for no valid reason – not for solving any particular long-term problem or filling the gaps in the market, then the founders of the company do not have a strong idea of what they wish to achieve.


The next question that you would ask is with respect to the technical documentation of the company. Do they have the proper white paper? It is written well & structured properly? Does it have all the technology-related information? White papers of most of the infamous ICO scammers tend to simply beat around the bush by making use of complex sentences and irrelevant references.


  1. Inspect the Team: When you are inspecting the particular ICO team, you must pay attention to two vital aspects – their accounts on the social media and learning about the important people working in the team’s background. Firstly, you must look for the existence of any major social media accounts of the given team. If they do have one, look into whether or not they keep posting something about their services. An ICO team that is inaccessible on the web other than the site is a great red flag you should not ignore.


Secondly, you should take some time in learning about the important people involved in the given ICO team. If you come across one person having a track record of some scam in the past, leave the grounds right away!


  1. Official Media Channels: While examining the official media channels of the particular ICO, the number of followers might not be your major concern. Instead, determining how active the discussions on such channels are and what exactly the members are talking about should be your focal point. Communities having thousands of members with inactive discussions should always be a matter of concern.
  2. People’s Reviews: With the possibility to come across the reviews of such services online, you can easily look into what others have to say about the specific ICO offering. You should aim at gathering ample resources about feedbacks and reviews from people all around the world. Even one to two negative reviews about the site could be a red signal that should encourage you to continue researching for the best, reliable ICO available out there. If the idea is based on an already ready solution and the team wants to improve. This is a good sign that they can succeed. As a rule, such teams use a new approach to white label crypto software or artificial intelligence.

When you are investing your money in some ICO, here are some more signs that can help you in detecting an ICO scam:

  • Nothing about the major services, but too much talk about offering attractive ROI (Return on Investment).
  • The product offering with poor technical documentation.
  • Immensely vast, but inactive social community.
  • Absence of any core team

Whether you are a new investor or a seasoned player in the ICO market, looking out for warning signs indicating that the specific ICO is a scam can be immensely helpful for your overall image. The conclusion here is that you should not trust any ICO offering without doing proper research to filter out the choices of scam services – available in abundance out there!


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