5 Signs of an ICO scam: Red Flags of a Ponzi Scheme

[DavidBooker]

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

[Bagani]

Thanks for the information, i keep this one when i pick bounty campaign. Could be my guide to pick the perfect one who really lay us .  I really dont have any idea which and how i find the areal and scan. Hopefulky this knowledge can help ne to determine those ico.  I review all of them just with me and dont depend  on any review made by the other

[CuriousGeorge]

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

In fact that your article is not really useful for those are aiming instant profit after ico has already listed on the exchange site. I can tell you about one example just like bankera. The CEO of bankera has known by the majority of crypto users as a scammer because he was scamming so many people through ran spectrocoin. Hundreds bitcoin have disappeared. But people are still don't care about that

[Rosyanroid]

Thanks for the post. A help for the newbies to know about the scams. This would be very helpful for the future.

[jefrystar]

These are the basic things to know. Thanks for this by the way. Learned different things about scams. I hope in future this would lead me to right path and I hope scams would be decreased soon. I'm happy that people are taking initiatives for it.

[KryptoKai]

Those are some good basic tips, bitconnect was a hugely successful ponzi for early investors but a horrifying experience at the end as is the case of all ponzi schemes. Googling the team members for anything more than a social media profile would help to ensure they are real people.

[rajurathod18]

I agree with your final points but I feel all ICOs are not scam, sometimes some ICOs fail to raise their softcap and don't get enough support as per their expectations. Some ICOs return invested funds to the investors if softcap not reached but some ICOs take lot of time like investors funds is lock for no use or some run away. Final thought point 5 I mostly refere to view reviews of ICOs on different different sites which gives confidentice to take call on investment.

[Tapcoinofficial]

David.

I like your list, and i agree with most of what you have to say. I do want to add one thing.

Be cautious with reviews because they can be misleading. Some ICO review sites take money for positive ratings. Also, in my experience, sometimes competing ICOS will brigade review sites and social media sites to create FUD. They will pay people to up vote the posts and create false narratives. From a psychological perspective, humans sometimes remember things incorrectly and remember false things as true. A lot of times people just repeat false narratives as truth, when they did not do any research on the validity of said false claim. You really need to research any claim thoroughly. A good example of this effect is the IOTA controversy.

RESEARCH RESEARCH RESEARCH ! Trust no one ! Message people on LinkedIn. Ask the community mods hard questions. Be skeptical of any ICO or project that is overly price focused. Good projects are like Golem; they care about the long term vision of the product. 

[Casmania]

Those are some good basic tips, bitconnect was a hugely successful ponzi for early investors but a horrifying experience at the end as is the case of all ponzi schemes. Googling the team members for anything more than a social media profile would help to ensure they are real people.

It was a year ago of being offered by a friend through messenger chat on these type of investment on bitconnect, at first it was a nice idea but I think more time and silently speculate all about ponzi scheme. This wouldn't be a good type of investment because there's no product on it, and yet the system was offering lending platform which hasn't been doing crowdfunding ever since like thus other crypto platforms. However, we need to assure briefly how this crypto situation go further and all we have to do for now is wait for current updates to be clear up from the developers of this project.

[AmericanBit]

Here: https://icoguide.com/en/blog/how-to-identify-scam-icos some addition to the authors thoughts, article also shows methods of scam identification.

[DavidBooker]

Thank you guys for sharing your thoughts. I'm glad you found the article somewhat helpful.

[realaccountakira]

Although taken from another article, this is actually a really good post that could serve to inform newbies out there. Just one comment, which is probably specific to this forum, you could also add the following:

6. The ANN thread - Usually, ponzi scam coins have extremely bad marketing design (visuals). There is no sense of professionalism or effort in the way that details about the coin are written and everything is just plain text. A real coin or project would have at least the time, people, and the right plan to execute a good announcement. The lack of putting in effort into such is a clear indicator of their true motives (to steal your money).

[ccsang]

I agree with your final points but I feel all ICOs are not scam, sometimes some ICOs fail to raise their softcap and don't get enough support as per their expectations. Some ICOs return invested funds to the investors if softcap not reached but some ICOs take lot of time like investors funds is lock for no use or some run away. Final thought point 5 I mostly refere to view reviews of ICOs on different different sites which gives confidentice to take call on investment.

that's not enough to avoid scam ICO, even if project have a active community and look like potential project, it's also have a chance become scam at the end, such as project owner run away, example denaro, collect 8m and finally run away, don't trust any ICO ratings website, I think ICO information not true, maybe some of just paid for higher ratings, so it's hard to distinguish scam ICO or not, better wait for tokens listed on exchange and most of them buy price must lower than ICO price

[Yudhisthir]

It's becoming harder to spot scams and difficult to define them.
What would you call I team that uses raised ICO for visiting places and paying themselves monthly salaries while doing nothing towards project development.
They are the largest scammer now.
Scammers like impressio are too easy to detect.

[joshsmith15]

Yeah anything promising high interest rates is an obvious scam, you'd have to be dumb to believe that.

[JacobLiam12]

This is the mostfrequently asked question that how to find out a scammed ICO. Hope your post will help them much. From now on I will give the link of this post in anyone asks the same question.

[croptodic]

In crypto market there are lots of scams also based on ICO there are also because they show or campaign wrong projects and people invest money based on hype and profit but this short run steps may bring huge loss also people should aware of this & this 5 things really will help people to invest.

[BlakeMye]

A well detailed description of the project must be present, whether the project really needs the use of a well-developed blockchain, how active they are on social media, their fame on social media and good word of mouth. If all these sings are not present then these are the presence of a red flag.

[El Loco]

For me Team is the first thing to check. But in general I agree in all with you. Good article and thanks for sharing, I hope it would help a lot of newbies to avoid being scammed.

[HarpeCharlotte]

Great information. Every investor must need to know this. They need to know what is scam and how they affect us. That’s why this 5 signs will help investors in the future.