How to avoid ICO scams

Right after the ICO phenomenon first appeared on the market, it has created lots of buzz around itself. Some were seeing it as a win-win situation – users are buying coins for an affordable price, meanwhile, the platform gains needed capital. However, others, especially governmental bodies were perceiving ICOs as an opportunity for money laundering. Just like South Korea, many countries are considering banning ICOs entirely as that is something they cannot control and build trust for. Well, that is justified, as there were several cases when ICOs turned out to be scams, so the ‘take the money and run’ was the exact case in those situations.

Loads of money was stolen and people fooled around. However, a bad experience should not define the further development of ICOs. Thus, in order for you to detect the ICO scams easily, we have prepared several aspects you, as a prospective investor, should pay attention to. Moreover, we would also explain what ICO is for the beginners who have no clue what we are talking about.

What exactly is ICO?

ICO stands for Initial Coin Offering. Presumably, you have a better understanding of the term now. Judging solely from the definition, we can say that this is a way of fundraising through the selling of tokens to the investors and future traders. The main purpose of an ICO is to raise capital while allowing the ones who are interested in the new coin to buy it for an affordable price. Seems like everyone wins, right? Theoretically, yes. But that is not the world we live in. Once people see that something/someone is successful, they try to duplicate it in order to benefit themselves. And that is what started to happen after the boom of cryptocurrency back in 2017.

Ways to detect ICO scams

It is important to be attentive to details. Especially in a sphere like cryptos, as it is known to be volatile, changing, and dangerous for the ones who don’t know what they should be aware of. That is simple ‘beware of the dogs’, who are the scammers that create fake ICO to gain money and disappear in that case.

Do research – read reviews

Conducting thorough research is the first thing that might help you detect scams out there. Thus, that is of utmost importance to find the source that would provide you with an honest review of the brokerage company and the way they operate. By analyzing the company’s operations, the way they manage the business, you can easily understand if they have launched the ICO in order to develop and invest the raised funds back into the project, or just get your money. However, keep in mind, that in the era of digital promotion and advertisement, a paid-for review is a well-adopted phenomenon.

So, if you see the review stating that X broker is the best one of the market, do not rush to invest in X’s ICO. Analyze everything yourself. What we mean by analyzing is filtering the information provided about the broker. Don’t pay much attention to the opinion of the source itself. You need to look for a review that will offer as much information as possible. We need precise details, not abstract statements. Thus, try to look for the sources that are most likely to provide you with the trustful reviews about the broker.

Study the company’s website

When trying to obtain information about the company launching ICO, the best way to do that is by searching for its official website. The legitimate brokers know that the website is their business card, that is their ‘face’ in front of the community. Thus, if they have something to hide, you will clearly see that. And here what you need to pay serious attention for.

The first thing you can do is to click the ‘About us’ tab. Here the companies are usually promoting themselves, providing all of the necessary information. Therefore, if there is no such tab on the website, or if there is a miserable amount of the details in it – run! That is definitely a scam and you shall avoid trading and anyhow contacting with such companies. Next, you should look for licenses and regulations. Each country has its own regulatory institution that grants licenses to the newly-established companies. Usually, the company itself provides a regulation/license number on the website. Sometimes, that is not the case, but you still can look it up in the register of the regulatory institution. Therefore, if you couldn’t find any trace of the company’s official license…scam, scam, scam! What you could also do is to check people standing behind the ICO.

You might find those right on the website of the broker, or you can conduct a little research and try to find them in social media sources like LinkedIn. By looking at the portfolio and professional experience of people connected to the company, you can clearly understand whether you can go with them, or avoid those guys by any means. Try to contact those people and pretend that you are a possible investor, or maybe an interested trader.

Check the documentation

You need to look for the White Paper of the company. That includes everything: road map, what are the plans for the following 5 years, information about the coin, why the company was established in the first place, names of team members, social channels, etc. But be careful. You need to also check the White Paper for plagiarism. Meaning that even if it looks great, there is still a possibility that the company just took someone else’s documentation and tries to claim for its ownership.

Moreover, check if the document contains any typos, broken links, or copied concepts. As those are direct indicators of lack of professionalism. That, in turn, might be a sign for you to doubt the validity of that company’s ICO. Summing everything up, we would like to mention that even though there might be lots of ICO scams out there, you can still detect those. For that, you need to be attentive to details and able to conduct an analysis based on the information obtained.

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