How To Identify ICO Scams – Free Guide For Blockchain Investors

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How To Identify ICO Scams? – Free Guide For Blockchain Investors

Disclaimer: Although we hope that the following guide will provide blockchain investors with a framework for evaluating Initial Coin Offerings, we cannot accept any liability for the information provided on this webpage.

Investments in tokens and cryptocurrencies are risky, often completely unregulated, and may result in the loss of all invested capital.

Are you a blockchain investor?

Before we look at how to evaluate an ICO and how to identify a possible scam, let’s find out what defines a blockchain investor.

Essentially, if you are buying any crypto assets, such as coins or tokens, you could qualify to call yourself a blockchain investor.

Because a trader of crypto assets may not necessarily be consciously investing in blockchain projects. Market traders are mainly driven by the act of trading and chasing short term gains.

Yet if you feel inspired by a specific blockchain project and invest your fiat money or cryptocurrency by buying issued tokens or coins during the Initial Coin Offering, then you can assume that you are a blockchain investor.

The importance of the White Paper (not the website)

When it comes to Initial Coin Offerings the White Paper explains the project in a much greater detail than the website. The website is generally a recycled sales pitch. Many ICO websites use similar web systems for presentation and token collections.

Did you know that ready-made ICO web templates are available for as low as $100? Today, even complete ICO websites with existing tokens and smart contracts can be purchased for a few thousand dollars.

However, a well elaborated and unique White Paper is a bit more difficult to replicate (although not impossible, unique approach can be replicated and applied in a different niche). A good White Paper must explain the vision of the project and provide detailed, numeric information relevant to any serious investor or partner.

When reading and analysing a White Paper, you need to use your common sense and critical thinking skills to be able to find ‘holes’ in the project. Scam ICOs often don’t focus much on White Paper development and they are often poorly written, lacking essential information about the project, and sometimes simply don’t make much sense.

Focus on WHO is involved in the ICO and the project

When it comes to ICO projects, the ‘who’ is often more persuading and telling than the ‘what’. Every ICO shows a profile of their members and the people involved in the project. The profile includes a photo, names and usually a very brief summary of experience.

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Believe it or not, scam ICOs often use public photos of random people or known personalities in the crypto space. Fortunately, the profiles of shown people can be quite quickly verified and confirmed whether they are indeed part of the project.

The easiest way to verify whether a person is indeed involved in a particular project and it is the same person as in the photo is by doing a name search using Google or other image search engines. However there might be many people sharing the same first name and last name, so searching by the actual image is more effective.

To do an image reverse search simply save the photo of a team member presented on an ICO website, go to Google Images search, click on the camera icon.

This will open additional menu with options as seen in the image below. You will have the option to paste the URL of an image, (which you can use without saving the image to your computer), or to upload a saved image.

Browse through the images and see whether you can find the person that was in the photo. If you find the person from the photo, follow up with an email or quick social message to ask about their involvement in the project. If they are surprised by the idea, than this is a very clear indication of a possible ICO scam.

If profits are guaranteed, it’s a Ponzi scheme

ICOs that offer guaranteed profits to blockchain investors are most likely a Ponzi scheme where money from the most recent buyers is used to pay off the earlier buyers. This is one of the oldest financial scams in the world and we all know how it ends because we’ve seen this before. The pyramid will collapse eventually when new user supply weakens or ceases to exist.

The blockchain market is still very fragile and prone to huge price swings. One day Bitcoin is worth almost $20,000 and a few days later is worth $15,000, and then $10,000 and $8,000. Promising very specific results to investors by a project based on the blockchain market is very suspicious, to say the least.

‘If something is too good to be true, then it probably is’ – a wise saying which also applies well to ICO investments.

Ask yourself. Is this project feasible?

Can the ICO team really deliver what they set out in their White Paper? Do they have the foundations ready? Is the technology developed? Do they have access to existing user base? The ICO’s that usually succeed in the end are those that have the fundamental structure already in place, the technology, user base, and an active company that is expanding its offer to blochchain.

Do not be swayed by graphics, clever marketing and promises of what is to come if you invest. The feasibility of the project is of paramount importance, yet too often overlooked by investors.

Scammers like to imply the use of trendy technology such as VR (Virtual Reality) and AI (Artificial Intelligence) in their blockchain project descriptions, yet they have absolutely nothing to back this up with. No code in Github repository, no running technology, no existing user base, and they are barely a legitimate company. These long shot ICOs usually end up being scams, or unable to deliver, die a natural death. In both scenarios the investor loses.

Check ICO rating websites but remain vigilant

There are many websites that collate information on the latest ICO projects. These dedicated websites often follow internally developed rating system for ICOs. Everyday thousands of blockchain investors rely on the information and the rating scores provided by sites such as,, etc.

It’s also quite common to see highly rated projects advertise their achieved rating on their ICO website to appear more legitimate and enticing to investors.

Although the ICO rating systems and proposed scores can initially be helpful to a blockchain investor, one should never rely only on their data to make investments. Some rating websites may also have affiliated accounts with some of the ICOs and benefit from giving them preferential rating and exposure on relevant channels.

Unfortunately, there have been many occasions where a highly rated ICO turned out to be a scam, got hacked, or simply failed to produce the promised results.

Until Initial Coin Offerings are fully regulated, a retail blockchain investor needs to do his/her own research and remain vigilant.

What is a FAKE ICO?

It’s quite simply a scam in which the people behind the ICO have no intentions of building any projects or honour any promises outlined in their proposal and website. Their only intention is to take the investors’ money and run.

Sometimes it’s quite hard to spot a fake ICO, but following this guide and doing your own investor’s research will help you to spot bad ICOs from miles away. The white paper included usually makes unrealistic claims and promises of big profits to the investor. ICO scammers will often use fake photos and identities of the project’s team members.


This type of scam hurts both parties, the creators and the investors. A hijacked ICO often happens through the use of social media, when people pretend to be a part of the project and direct interested parties to a different deposit page that will look exactly as the real one. Except the deposited crypto will go not to the project but to private addresses.

All ICOs collect user data and deposits through dedicated websites. Unfortunately, website and user traffic can be hacked and redirected. Designers can replicate websites and the deposit page to the last dot. A good way to check and verify that you are always using the project’s authentic website is to check its URL for consistency.

For example if you are on a project where main website is and after the registration you are redirected to a payment details page on it’s a big warning sign that the project may have been hijacked.


A dead coin is a project that failed, has been abandoned or didn’t manage to survive for other reasons. Some ICOs fall even before they get listed on an exchange and some don’t even manage to survive the first 6 months.

The lack of external support, issues within the management, unforeseen challenges of product development . There might be wallet issues, no nodes or simply no communication from the team. Before investing in any token or coins, check whether it’s not already listed as dead. Coinopsy keeps an updated list of dead coins.

Due to the lack of appropriate regulation, investors’ money is almost never returned. A dead coin simply represents and reflects a completely failed project.

How to Identify Cryptocurrency and ICO Scams

Dozens of new cryptocurrencies launch each month, and alongside these new tokens and coins comes a series of initial coin offerings (ICOs). The appetite among a broad pool of investors for these opportunities has grown, even in spite of the fact that cryptocurrencies were battered in 2020. All of these factors combine to entice scammers. After all, if investors have proven that they are willing to throw money toward a highly speculative cryptocurrency, they seem to be equally likely to invest in fraudulent tokens or ICOs.

For the cryptocurrency investor looking to make the most of the host of new investment opportunities while remaining safe from fraudulent ICOs and sketchy coins and tokens, the prospect can be daunting. Blockchain and cryptocurrency technology is developing at a rapid pace, and even experienced investors may find it hard to keep up with the terminology. While there’s no guarantee that any cryptocurrency or blockchain-related startup will be legitimate or successful, the steps outlined below can help you to be as sure as possible that you’re not falling for a scam.

Get to Know the Team

Perhaps the single most important success factor for any ICO or cryptocurrency is the developers and administrative team behind the project. The cryptocurrency space is dominated by major names, with superstar developers like Ethereum founder Vitalik Buterin capable of making or breaking new projects simply by having their names listed on a development team. For that reason, it’s increasingly common for scammers to invent fake founders and biographies for their projects.

The best protection against this fraudulent tactic is to thoroughly research the individual team members of a project before you invest. It’s a bad sign, for example, if you’re unable to find any information about a particular developer or founder on LinkedIn or other social media outlets. Even if profiles do exist, check to see if their activity seems to match up with the number of followers and likes they accrue. Individuals who rarely engage with their followers and yet have thousands of fans may not be real.

Beyond determining whether the development team is real, it’s important to make an effort to see if their qualifications measure up. Do the founders have the experience they claim to have? Is it relevant to the current project at hand?

Pore Over the Whitepaper

A cryptocurrency or ICO whitepaper is the foundational document for that project. The whitepaper should lay out the background, goals, strategy, concerns, and timeline for implementation for any blockchain-related project. Whitepapers can be incredibly revealing: companies that have a flashy website may reveal they lack a fundamentally sound concept. On the other hand, a company with a website containing spelling errors may have a whitepaper that indicates a rock-solid concept and a carefully conceived implementation plan.

The first step toward analyzing a whitepaper is to read it very thoroughly. Check to see if the whitepaper has complimentary resources as well, including financial models, legal concerns, SWOT analysis, and a roadmap for implementation.

Companies that don’t offer whitepapers should be avoided at all costs. Still, it’s possible for a fraudulent company to put forward a convincing whitepaper, as was the case with PlexCoin; this company managed to raise over $15 million before the U.S Securities and Exchange Commission (SEC) stepped in to shut it down. A whitepaper should answer all of the questions a potential investor might have about what sets this particular project apart from its competitors, how it aims to be successful, and the measures it will take to achieve its goals.

Look to the Token Sale

Any ICO will depend upon a token or currency system in order to facilitate the crowdfunding process. Legitimate companies and endeavors make the system itself and the progress of the token sale easy for potential investors to view. Look for the token sale figures as the ICO is ongoing. Better yet, watch the token sale over time to see how it is progressing. If a company makes it difficult for anyone to chart the progress of its ICO, this is a major red flag. Some scam ICOs will hide their token sale progress under the pretense of individual contribution addresses; this prevents potential investors from seeing exactly how much has been raised and how much time remains in the sale. In some cases, this might be an effort to generate a sense of urgency among potential investors, even if there isn’t evidence of a successful sale going on at the same time.

How Feasible Is the Project?

While it may seem obvious, ICOs, and cryptocurrencies with the greatest chances for success are those that have the fundamental structure to outlast their competitors. Many launches, even highly-publicized ones, have sputtered after initial interest faded. Your best chance of a successful investment relies on a company having an achievable, feasible set of aims. The company should have a compelling concept for the time being, but it also must be able to carry that concept over into execution over the short and long terms alike.

Going along with the question of feasibility is the issue of transparency. Companies that have outstanding concepts and models are more likely than others to want to be as transparent as possible with the broader community. Look for companies that aim to keep potential investors up to date with regular, detailed progress reports on a company website or on social media. It’s also useful to look if a company has a timeline for what has taken place in the development process, as well.

Exercise Caution

Even the most successful ICOs and cryptocurrencies are slammed for being fueled by speculative investing. The idea of getting rich quick on an investment in a hot new project is tempting enough to draw seasoned investors and beginners into risky areas. Keep an eye toward caution as you look for new investment opportunities in the ICO and cryptocurrency spaces. Be aware that projects sounding too good to be true likely are. Spend time scrutinizing every detail, and assume that the absence of a piece of crucial information may be an attempt to hide an unsound model or concept. Look for outside sources to verify the legitimacy of any project before making an investment, and always ask questions that you can’t already find the answers to. The cryptocurrency and ICO spaces offer tremendous opportunities for investors who have done their homework and are able to make sound investment decisions. They also feature pitfalls, which can lead to large amounts of money being lost due to scams, frauds, or even legitimate businesses that are simply poorly designed and unlikely to succeed.

How to Find Your Next Cryptocurrency Investment

The advent of Bitcoin and its stellar rise over the last few years has investors pouring their money into cryptocurrencies by the millions. Cryptocurrencies and blockchain projects achieved impressive returns, as well as dramatic declines.

Now, others who seek to emulate the returns of their peers are looking for the next big thing in the market. There are currently hundreds of alternate cryptocurrencies, referred to as “altcoins.” Often the newest ICO, or initial coin offering, represents an opportunity to multiply one’s investment , but they are also highly risky. However, it’s hard to predict which coins will receive the most attention and why. With the right recipe, a cryptocurrency can achieve sustainable growth and keep it once the bubble pops.

Find the ICOs

The first step is to figure out which initial coin offerings are coming up. With sites like ICOalert, developers have a place to list their upcoming pre-sale and public sale. They can also list other information like the soft cap, buy-in price and team profile. Savvy investors can use sites like these to plan their entry, do research, and have their money ready to invest in the best events.

The popularity of ICOs is shooting through the roof with data supporting the hype.

“ICO Alert has seen our amount of unique daily users double every 2 to 4 weeks. The growth is incredible, and validates our view that the community wants an unfiltered list of ICOs. ICO Alert remains the only free-to-list ICO website and the only comprehensive list of active and upcoming ICOs, so we expect the growth to continue,” said Robert Finch, the founder of ICOAlert.

Evaluate the Opportunity

While the rare ICO captures the attention of investors and raises the cryptocurrency it requires, many will inevitably fail,. Studying the market is not complicated and gives one a good idea of how the coin will fare.

How unique is the idea?

There are millions of ways to use blockchain, and new ideas are cropping up every day. Currently, the market is not impressed with coins that simply recreate the “decentralized currency” model, nor should they be. Bitcoin was a revolutionary idea when it was first invented, but now all cryptocurrencies share its functionality. Look for something that puts a new spin on an old concept or seeks to accomplish something ambitious. If you see obscure or regurgitated language on the project’s website, stay away because it might be a scam.

Distribution of the currency

The smart contract that manages the coin’s distribution has specific rules, like how much will be made available, to whom, when, and whether unsold coins will be “burned” (destroyed) or not. Typically, the scarcer a coin is in relation to its supply, the more it will fetch on the open market. Look for information on how many coins will be sold in the closed pre-sale (and what the bonus is for buying at that time), the ICO time window, and more.

Exchange plans

The most bullish thing for any cryptocurrency is to be listed on an exchange. If a place like Coinbase, Bittrex or Kraken announces plans to list a coin that is still in its ICO phase, this is an excellent sign.

Which blockchain is it built on?

New ICOs must be launched from an existing blockchain, unless they plan on building their own. The chain that the coin is built on determines which existing cryptocurrency one will use to participate in the ICO. A project using Ethereum’s blockchain will require Ether to purchase the new coin. Thus, at first it will be exchangeable only with Ethereum and no other cryptocurrencies. If it uses an obscure chain such as NEO, this could put a cap on price.

Who is on the team?

Look at the team’s composition for expertise and experience in the industry. Every real project will publish a short profile of each member, their history and individual role. A big team full of veterans is favorable.

All about the assets

The white paper is by far the most important determinant of a project’s seriousness. It should be comprehensive, thorough, and explain the technology and purpose of the coin well. Other assets can include videos, blog posts and other contributions from the team.

Check the community

Lastly, the community is a crucial indicator of a cryptocurrency’s potential. Cryptocoins have followings that gather online on websites like Reddit and Github is a great resource as well, and those who can read code can see get a glimpse of how well the project is programmed. Social media is less important, but can also be useful. The hype that a coin receives has a close relationship with its eventual price, because those talking about it are usually investors themselves. Beware of bounties however, a practice that crypto startups use to reward those who spread the good word. Form your own opinion and always take another’s with a grain of salt. (See also: Here’s What’s Next for the Bitcoin Bubble)

Investing in cryptocurrencies and other Initial Coin Offerings (“ICOs”) is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs. Since each individual’s situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. This article was first published on September 7, 2020, as of that date the author owned cryptocurrency.

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