June 19, 2024
Computer Scammers

How do you avoid the traps and spot the genuine opportunities? This guide will arm you with the essential skills to differentiate the real deals from the frauds.

Let’s dive into the crucial world of ICO due diligence, and ensure your investment doesn’t turn into a costly mistake.


In the world of cryptocurrency, you’ve probably come across the term Initial Coin Offerings (ICOs), but it’s crucial to understand how to spot potential scams before investing your hard-earned money. ICOs are popular fundraising methods used by startups and companies that want to create a new coin, app, or service. Similar to an IPO in the traditional finance world, an ICO serves as a way to raise capital. However, unlike IPOs, which are typically for well-established companies, ICOs are often for the young and risky.

The allure of ICOs is undeniable. They offer the potential for high returns and the chance to get in on the ground floor of innovative projects. Yet, this high-reward potential comes with high risks. The crypto-asset industry has seen its share of scams involving ICOs, tarnishing the reputation of this fundraising method.

When it comes to ICOs, not all are created equal. Some have provided massive returns to investors, while many others have proven to be scams. These scams can take many forms, from promising high returns with little risk to the lack of transparency about the project team and their credentials. It’s essential to approach ICOs with a discerning eye to spot these red flags.

To navigate the ICO landscape successfully, you need to arm yourself with knowledge. Understanding the ins and outs of ICOs, being able to identify potential scams, and conducting your due diligence are all key to protecting your investments. Remember, in the world of ICOs, the saying ‘caveat emptor’ or ‘buyer beware’ couldn’t be more relevant.

What are ICO’s

Given your interest in the world of cryptocurrency, it’s essential that you understand what ICOs are before you dive into investing.

ICOs, or Initial Coin Offerings, are a form of crowdfunding that businesses use to raise capital. They do this by creating and selling a unique digital token to finance project development.

These tokens aren’t your typical cryptocurrency. They function like a unit of currency that gives you, the investor, access to certain features of a project run by the issuing company. These tokens are innovative and unique because they help fund open-source software projects, which can be tough to finance under traditional structures.

Imagine the token as a key, a key that opens doors to the project’s special features. You get this key by trading your hard-earned money. Companies use these funds to fuel their project development. It’s a win-win situation, but only if the project succeeds.

Through ICO trading platforms, you can receive these unique tokens in exchange for your monetary investment. This is the world of ICOs in a nutshell. But remember, not all that glitters is gold. In this bustling market with a capitalization of over $100 billion, scams aren’t uncommon. Therefore, it’s crucial to understand the risks and red flags associated with ICOs.

Scam Types of Initial Coin Offerings

You must be aware of the various scam types that plague the world of Initial Coin Offerings.

We’re going to examine five key methods:

  1. Exit scams
  2. Phishing
  3. Pump and dump schemes
  4. Ponzi schemes
  5. Crypto market manipulation.

Exit scam

One must be wary of the infamous ‘exit scam’, a common deception in the world of Initial Coin Offerings where the founders disappear with your investment after the ICO. This scam is as straightforward as it’s ruthless. Founders launch the ICO, heavily promote it, convince investors of its authenticity, then vanish with the funds.

To avoid falling for an exit scam, keep these points in mind:

  • Be skeptical if the team behind the ICO remains anonymous or provides minimal information about themselves
  • Look for a comprehensible business plan, not just a flashy website or lofty promises
  • Check for the presence of escrow services
  • Be cautious of ICOs that are heavily promoted on social media but lack substantial media coverage elsewhere.

Stay vigilant and do thorough research before investing.


In your journey to invest in ICOs, it’s crucial to be aware of phishing scams, a common trap set by fraudsters aiming to steal your personal information and funds. These scams often arrive in your inbox with attractive offers promising high returns. However, clicking on the embedded links can lead to a loss of your valuable data and crypto assets.

To keep your investments safe, always verify the sender’s email address and be wary of emails full of grammatical errors or unrealistic promises. Legitimate ICOs rarely solicit investments through emails. Additionally, consider installing a reliable antivirus software that can detect phishing attempts.

Pump and dump

Continuing your journey in the cryptocurrency world, it’s critical to watch out for ‘Pump and Dump’ schemes, another common scam in the realm of Initial Coin Offerings (ICOs). Here, fraudsters artificially inflate the price of a digital token, then sell off their holdings, causing the price to plummet and leaving unsuspecting investors high and dry.

Spot these schemes by being aware of:

  • Sudden price spikes: Rapid, unexplained increases in token prices can be a sign of manipulation.
  • Overzealous promotion: Be wary of influencers excessively hyping certain tokens. They may be getting paid to pump the price.
  • Quick cash out: If original investors are selling off their holdings too quickly, it’s likely a dump.
  • Unexpected price drops: After the scam artists exit, the token price typically crashes. Keep an eye out for such drastic fluctuations.

Ponzi schemes

Another type of scam you need to be wary of in the ICO world is the Ponzi scheme. In this scheme, fraudsters entice new investors with promises of substantial profits, then use their money to pay dividends to earlier investors. This creates an illusion of a successful business, while the money is simply shuffled from new investors to older ones.

A notorious example is OneCoin, a so-called cryptocurrency without a blockchain, which lured millions of investors and bilked billions from them.

To avoid falling prey to such scams, always conduct thorough research on the project, its team, and its token utility. Be skeptical of promises of high returns with little risk.

Ponzi schemes are a persistent plague in the ICO world, so stay vigilant.

Crypto market manipulation

Understanding crypto market manipulation, especially in the context of Initial Coin Offerings (ICOs), is crucial for protecting your investments from potential scams. Founders often create a false trading activity image, making it seem like their cryptocurrency is thriving.

Here are some tactics to watch out for:

  • Pumping liquidity with their unique tokens to create the illusion of success
  • Encouraging investors to buy these tokens with established cryptocurrencies like Bitcoin
  • Cashing out from the liquidity pool and disappearing with the money

Be vigilant and read the company’s whitepaper carefully to verify its legitimacy. Look out for anonymous founders as this could be a sign of a potential scam. Remember, in the world of ICOs, caution is your best ally.

How to spot an ICO scam

In your quest to invest in promising ICOs, it’s crucial to know how to spot potential scams. Assessing the project and the team behind it’s your first line of defense. Projects that lack a clear use case, or that use buzzwords without conveying meaningful information, are red flags. If you can’t explain the project’s purpose to others, that’s a warning sign.

Likewise, be wary if the project doesn’t genuinely need blockchain technology. Some projects claim to use blockchain, but it’s just a buzzword for them; they could easily achieve their goals without it. The project’s whitepaper should clearly justify the use of blockchain.

Next, scrutinize the team. Unknown individuals without a track record in the industry should raise suspicion. Verify the team’s credibility; check their past achievements and established businesses. If the team information isn’t transparent on the project’s website, proceed with caution.

Before investing, conduct thorough research. Don’t follow recommendations blindly. Read the project’s whitepaper and engage in discussions on platforms like Telegram or Discord. Don’t invest until you’ve found satisfactory answers to all your questions.

Also, examine the project’s roadmap and community engagement. A clear and up-to-date roadmap that outlines past and future milestones is a good sign. Founders who actively engage with their community and provide regular updates are more likely to be legitimate.

Lastly, remember that trading cryptocurrencies requires understanding the basics of blockchain technology, and choosing a reliable cryptocurrency exchange. Armed with this knowledge, you can avoid ICO scams and make informed investment decisions.


Armed with the knowledge on how to spot ICO scams, you’re now better prepared to navigate the often murky waters of cryptocurrency investments. The realm of Initial Coin Offerings (ICOs) is rife with opportunities, but it’s also a breeding ground for fraudulent activities. Thus, it’s crucial for investors like you to stay vigilant and make informed decisions.

The key to safeguarding your investments lies in your ability to critically evaluate potential ICOs. By analyzing the project’s whitepaper, scrutinizing the team behind it, assessing the token’s utility, and identifying any red flags, you’re less likely to fall prey to deceptive schemes.

Moreover, it’s crucial to remember these tips:

  • Be skeptical of ICOs promising high returns with little to no risk. If it sounds too good to be true, it probably is.
  • Research extensively before investing. Don’t just rely on the information provided by the ICO itself.
  • Look for transparency. Legitimate ICOs will disclose information about the team, project, and token distribution.
  • Always remember that the lack of regulation makes ICOs a high-risk investment. Invest only what you’re willing to lose.

Frequently Asked Questions

What is an example of an ICO scam?

An example of an ICO scam you might come across is a project that guarantees unusually high returns with no risk. These scams typically promote a sense of urgency for you to invest, often coupled with a lack of transparent information about the project or its team.

Here are some red flags to watch out for:

  • Guaranteed Profits: No investment can guarantee profits, especially not in the volatile crypto space.
  • Undefined Roadmap: Genuine projects have clearly defined plans. An ICO without a roadmap is a red flag.
  • Sketchy Team: A project team with no verifiable experience or digital footprint should raise suspicions.
  • Copycat Projects: If the project closely resembles an existing, successful one, it could be a scam.

How does ICO scam work?

In understanding how ICO scams work, you’ll first need to recognize that a majority of these scams rely heavily on deception and manipulation. They create a compelling narrative, often promising high returns with little risk. They may even flash impressive-looking whitepapers filled with technical jargon, designed to confuse rather than inform.

Once they’ve got your attention, these scammers will push for a quick investment, often using pressure tactics and creating a false sense of urgency. They may also use social media and email campaigns to spread FOMO (Fear of Missing Out).

Ultimately, the ‘project’ either doesn’t exist or fails to deliver on its promises. By the time you realize this, the scammers have disappeared, often making off with millions in investor funds.

How can you tell if someone is a crypto scammer?

Moving on from understanding how ICO scams operate, you might be wondering how to distinguish a genuine cryptocurrency enthusiast from a potential scammer. Here are some telltale signs to be on the lookout for:

  • Guaranteed profits: Crypto investments are risky and unpredictable. If someone promises guaranteed returns, be wary.
  • Pressure to invest quickly: Scammers often create a sense of urgency to prevent you from doing proper research.
  • Lack of transparency: Genuine crypto enthusiasts will be open and clear about their intentions. If someone is vague or avoidant about their plans, it’s a red flag.
  • Unsolicited offers: Be cautious of unsolicited crypto investment opportunities, especially those received through email or social media.

Stay informed and always conduct your own thorough research before investing in any cryptocurrency.

What percentage of ICO is scam?

Despite the potential benefits, you should be aware that a significant percentage of ICOs turn out to be scams. It’s estimated that at least 80% of ICOs conducted in 2017 were identified as scams, according to a study by Statis Group.

Regardless of the exact number, it’s clear that a large fraction of ICOs aren’t genuine. This doesn’t mean you should avoid ICOs entirely, but rather, you should approach them with extreme caution.

It’s crucial to do thorough research before investing. Check the project’s whitepaper, evaluate the team behind it, and examine its tokenomics. Be wary of unrealistic promises or pressure to invest quickly. Remember, if it sounds too good to be true, it probably is.

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