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Author Topic: 5 Signs of an ICO scam: Red Flags of a Ponzi Scheme  (Read 113 times)
DavidBooker
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June 20, 2018, 01:49:47 PM
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 #1

Please note that this article was initially published in our blog on Medium medium.com/assetrush/5-signs-of-an-ico-scam-red-flags-of-a-ponzi-scheme-67749af3565c

The number of ICO scams is growing rapidly and proportionally to the amount of money that is stolen. However, not every ICO is a scam, and it’s still possible to find a gem in the vast sea of fraud. Since a lot of people are reaching out to us at assetrush.com to seek our professional opinion on different tokens, we’ve decided to share with you five telltale signs that will help you avoid getting taken in by a Ponzi scheme.

1. The landing page

Start with the conspicuous: the landing page. The kind of information that is presented there can already tell you a lot. If you see a good description of the company, their project and vision, then it’s something worth your attention. Good examples would be Wanchain and Bancor, whose websites primarily focus on technology and architecture. If everything you see on the landing page is about a token sale and is supported by the phrase “make money”, then you should probably stop wasting your time and close a tab. Always keep in mind the infamous Pincoin which promised its investors up to 40% in monthly profit before turning out to be one of the biggest scams in the crypto history.

2. The product

Critically evaluating the product is the next step you should take. The first question to answer here is if this project really needs blockchain. Very often we read descriptions of products that are working well enough without the new technology. If a startup wants to use blockchain for no particular reason, not to solve a specific long-standing problem or fill in some gap in the market, its founders probably don’t have a strong idea of what exactly they want to do.

The second question is about the company’s technical documentation. Do they have a white paper? Is it well written and properly structured? Does it contain technology-related information? White papers of most ICO scammers beat around the bush using ambiguous complex sentences and Wikipedia-style definitions.

3. The team

When examining an ICO team, you should pay attention to two things as well. First of all, do they have accounts on some major social media? If so, do they constantly post something or are those accounts abandoned? An unrepresented and inaccessible ICO team, like in the case of the aforementioned Pincoin, is a cogent reason to smell a rat.

Second of all, take the time to learn more about the people who are working on the project and their backgrounds. This is very important because if you find out that at least one team member has a track record of being involved in some sort of scam, you’d better not take the risk.

4. The media

Another item to consider is the official media channels of the ICO. What matters here is not the number of followers (it may be most impressive), but how lively discussions are and what people are talking about. Inactive communities of 60000 members always look suspicious, and so do utopian conversations about how much money people will make by investing in this token. Bots instead of real people and paid promoters promising untold wealth are a major red flag that you’re looking at a scam.

5. What others have to say

We’re lucky to be living in the time of online reviews and tweets which can spread and blow up the Internet in a matter of seconds. Therefore, we suggest you don’t neglect such valuable resources. From Bitcointalk to websites like Is This Token A Scam to hashtag search on Twitter, use the Internet to the fullest to learn from others’ experiences. Even one or two negative reviews are a warning sign that should encourage you to keep doing painstaking research into a token before investing in it.

Final Thoughts

When it comes to plowing money into ICOs, no one can be fully protected. However, there are some signs that will help you detect a scam:

1. Nothing about ethos, but a lot about an attractive return on your investment
2. A product with poor technical documentation
3. No core team represented or a team member who’s been involved in fraud
4. Large, but inactive community
5. Negative reviews on various Internet platforms
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June 21, 2018, 03:26:58 AM
 #2

A very good list indeed. Also we've got to be very vigilant since scammers always try to wisen uo wach time.They can forge the team members or use fake identities. Your list is good, thanks for the education anyways.
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June 21, 2018, 05:17:01 AM
 #3

Really a helpful guide to avoid investing your money in a fraud/ scam ICO. I knew some of them but this was nicely detailed. I have invested in 2 ICOs yet and one of them is still in ICO. Will pay more attention to these listed points from the next time. Thank you.
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June 21, 2018, 05:38:17 AM
 #4

1. Nothing about ethos, but a lot about an attractive return on your investment

This covers 90% of all Blockchain Projects Scams. There were so many proof of stake coins with 10 000% ROI in just a few weeks, but who would buy this coins?

5. Negative reviews on various Internet platforms

I would be careful with this one. EVERY coin and project has negative reviews on some sites. Search for Bitcoin Scam for example

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June 21, 2018, 07:38:43 AM
 #5

One thing with lists like this is that the scammers also get to read them and I worry that it will help them better cover their tracks since they know what red flags people are looking out for. But then I believe the issue of the social media presence cannot be easily forged. After falling prey to a scam ICO, I have also come to notice that legitimate projects usually have their team members attend conferences, workshops, and other events related to blockchain or their sector. Any project with a face publicly attached to it is less likely to be a scam.

I feel nobody will be bold enough to go about speaking at events promoting a scam project.
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June 21, 2018, 08:05:58 AM
 #6

1. Nothing about ethos, but a lot about an attractive return on your investment

This covers 90% of all Blockchain Projects Scams. There were so many proof of stake coins with 10 000% ROI in just a few weeks, but who would buy this coins?

5. Negative reviews on various Internet platforms

I would be careful with this one. EVERY coin and project has negative reviews on some sites. Search for Bitcoin Scam for example

if any project is talking only about the value of their token/coin and not the tech and uses behind it, then most probably its a scam. But yeah, negative reviews don't tell you about being scam or not. Many good projects have negative reviews. There will always be people who will criticize and write negative about things which they don't understand. Warren buffet says whole crypto industry will come to a bad ending. It doesn't make whole industry a scam.
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June 21, 2018, 08:25:26 AM
 #7

Thank you so much for your informations that you have provided to us.
In additional I would like to add that you can find easy the bots on telegram . Always the owner of that icos programmed bots that add bots

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June 21, 2018, 09:27:07 AM
 #8

they can fake all of this quickly as some of the scam projects based on the principle of spending a lot to get the trust, then you will gain a lot from scamming others.

General Rules:
 
 1. Do not invest in ICOs
 2. The more real information "real address, developers, investors, social media, company, and legal office," the fewer chances of scam.
 3. Promises quick profit with less effort.

You can add this topic, more comprehensive and short https://bitcointalk.org/index.php?topic=100696.0

jseverson
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June 21, 2018, 10:24:39 AM
 #9

One thing with lists like this is that the scammers also get to read them and I worry that it will help them better cover their tracks since they know what red flags people are looking out for.

Nah, I don't think this is a concern at all. Not all of these are things you can change just because you want to. The product part, for example, attempts to weed out ICOs which just use the blockchain as a buzzword to attract investors. You can't do anything to avoid that unless you're actually proposing a great solution to a certain problem, at which point you may as well go legitimate lol. The other areas, such as the landing page, the media coverage, and the community are more for marketing, which scams rely on because they don't have an actual marketable product. If they tone those down, they're far less likely to attract attention.

But yeah these are all just indicators, and an elaborate scam can look and act legit until they aren't. My personal opinion on the matter is that everyone should stay away from ICOs period unless they're absolutely sure of that they're doing.

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June 21, 2018, 12:22:24 PM
 #10

This is a very useful list for those who want to invest in ICOs. People should also rely on their own intuition, and pay attention to details like website quality in relation to what the project promises. One should even take a careful look at team members' faces, and if you don't like 'em, don't give them your money. Missing email address, social media links (especially those that are popular in the crypto world), no LinkedIn link next to team member picture, as well as using pseudonyms for team member names are warning signs.
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June 21, 2018, 12:28:30 PM
 #11

Very helpful, thank you!
DavidBooker
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June 21, 2018, 12:55:42 PM
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Thank you for all your comments! I'm glad you found the article useful.
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June 21, 2018, 02:45:44 PM
 #13

The number 3 is, I think, the easiest thing to spot on determining whether an ICO is a scam or not. There are many times that I have considered buying into an ICO only to look at the dev team and being disappointed by the results. Normally, if the team behind the coin is transparent and really want to get their brand known, they might as well get themselves known by the public. Oftentimes, dummy accounts and fake credentials are being used in such ICOs that it's easy to question the authenticity of their project and whether or not they're lying. From this simple point alone I base my decision while the others you mentioned remain in the process albeit only getting a minor role.

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June 21, 2018, 02:56:34 PM
 #14

Sadly to here that and I am very hate about this spam project . I don't know why they do that , just need for money . In my view , honest is just a based character as a good human .
Wishes just a little people be spammed by these project .

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June 21, 2018, 02:56:58 PM
 #15

Crypto is still the Wild West and due to its lack of regulation attracts many fraudsters.

I live by a few rules

A) spread your Investments into different coins. Not only top tier coins, not only coins that tackle a specific problem
B) don’t just follow the noise and always DYOR
C) accept losers and find the right time to cut dead bags
D) don’t only do FA or TA, do both
E) don’t expect to get rich over night. Patience is a virtue in crypto

Has worked quite well for me over time.

PS - savedroid wanted to come up with ICO vetting standards, no? Haven’t heard about these after their attention seeking fake exit scam.

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June 21, 2018, 06:59:27 PM
 #16

Good points to consider, they look really interesting and impressive. The annoying part of scam projects are those with large number of followers on their social media  platforms that are usually found on their telegram channels and groups. The twitter followers can  easily be authenticated through twitter audit. checking the real followers of a project is one way I use to identify the authenticity  of a project.

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June 21, 2018, 07:23:29 PM
 #17

Unfortunately, Ponzi schemes promise high returns with low risk but it ends up being a fraud. We go into it more in our blog post about scam coins, as well as some other scams to be aware of so check it out  Smiley
It's always important to be educated on these types of things in order to avoid unecesssary risk.

Bit.ly/ScamCoins

Cheers!

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