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Author Topic: Crypto Scams - fake ICO's  (Read 148 times)
joulion86
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August 06, 2018, 02:12:55 PM
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 #1

With a series of threads I want to draw more attention to all the scams in the crypto-scene to better protect all attentive newbies from fraud.

At the point of writing this, there are 355 failed coins on coinopsy's dead coin list.. There are other sources which claim that around 80% of ICO's are scams.

Imagine investing into a project you believe is going to break through. Your friend recommended it and you put a big sum of money in it, hoping for big returns. A month later, you check in on the project, and the site is down. There is no trace of the project, the developers or your money. This is when you realise: you have been scammed.

Classic ways of fundraising are tough, banks take large amounts of interest, investment firms want shares of the company and crowd investors are hard to find in masses. ICO's are a way easier way of raising cash, as they bypass restrictions and regulations for fundraising, that have been implemented by countries and banks over decades to prevent exactly what is happening now from happening: people getting shamelessly scammed out of their money. All you need is a pretty website, and a few guys that know their way around in marketing and a technical knowledge that surpasses the knowledge of the most investors, and that's it. When they have the money they want, the shut everything down and enjoy internet anonymity again.

The results are bad: scammed people will complain, and the Bitcoin reputation is going to take the hit. Then Bitcoin will get tougher regulations (or get banned), even though the scam has nothing to do with Bitcoin, it has to do with the greed of people, and people not being careful enough. Bitcoin only was the medium.

If you still want to invest in ICO's there is no guarantee for your money but here are a few ideas to prevent this situations:

1. Check their team, don't trust an inexperienced team. Check if team members are fake with Imagesearches.
2. Check the use. If their is no function behind the coin, there really is no need for it.
3. Check their community, their support and everything behind the frontpage.
4. Check to see if the coin might make it to a large exchange.
5. Check how long the ICOs tie up your investment.
6. Check with your friends that are more technically experienced in the cryptoscene, and talk them through the ICO and ask for their advice.

But here is the thing, even a completely professional page with awesome support and a great use is still no guarantee for a big return on your investment. You can compare it with real world businesses: 95% of businesses go broke in the first year, 99% do not survive the first 5 years. In the best case, you put your money in an honest company, that has a 5% chance of surviving. In the worst case, you send your money to nigerian prince who will disappear with your money.

Here is my overview thread about all crypto-related scams out there.

Have you had experienced anything around fake ICO's? Are there any points I should add or change? And most important, how can we protect new users from investing in bad ICO's if they do not inform themselves enough?

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August 06, 2018, 06:47:31 PM
 #2

But here is the thing, even a completely professional page with awesome support and a great use is still no guarantee for a big return on your investment. You can compare it with real world businesses: 95% of businesses go broke in the first year, 99% do not survive the first 5 years..

This is a very good point. New investors don't realize how hard it is to make a business work. I'm not sure the failure numbers you list are right; it depends largely on the industry (for example, fast food shops are easier to keep open than new oil mining ventures). However, the failure rate is high. The number I hear is 8 out of 10 new businesses fail. That's only a 20% success rate, which is still pretty low.

There is something else to consider. Business that are destined to be successful generally don't need a lot of funding. If the business has something of real value then they can turn that into cash and grow the business. This is especially true of web based startups, because everything is just digital information. It used to be that starting a business required a big outlay for building space, equipment, employees, licenses etc. at a minimum. Now everything needed to serve potential customers can be programmed.

The moral of the story is be vary wary of things that sound too good to be true. I'll give one last piece of advice, and this is something professional investors (eg Angels and VCs) look for: see if the business has traction. A key to investing is lowering the chance the project you invest in will fail. The best way to do that is seeing if the project has something going for it, even if small. When a team promises the moon but only offers a whitepaper that's probably a good indicator they will not be around.

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rdangi
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August 07, 2018, 11:19:42 AM
 #3

What about SPD ??
shitcoinoffering
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August 07, 2018, 01:08:22 PM
 #4

Look here. It must be useful for you!
https://shitcoinoffering.com/5-icos-that-sponge-off-charity/
Cryptopher
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August 07, 2018, 11:16:41 PM
 #5

I have absolutely zero confidence in ICOs. There are rarely any credible cases for ICOs to materialise into anything beneficial for all involved parties.

The very concept of ICO is toxic. A few months ago a work colleague of mine asked me about an ICO (which I shall not name) - I directed them to the red flags and they opted to not invest any money. Since then the "ICO" has disappeared into the ether. Surprise surprised eh?
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August 08, 2018, 04:58:58 AM
 #6

Great summary here!

Another big indicator that an ICO is a scam or likely to fail is if the developers are giving the tokens away for free. Cryptocurrencies that have legitimate value or utility to a market can command a price for purchase. If they're giving the tokens away for free the developers must know that their token isn't worth much, if anything at all.

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August 08, 2018, 06:18:52 AM
 #7

Great summary here!

Another big indicator that an ICO is a scam or likely to fail is if the developers are giving the tokens away for free. Cryptocurrencies that have legitimate value or utility to a market can command a price for purchase. If they're giving the tokens away for free the developers must know that their token isn't worth much, if anything at all.
I agree with you but not totally, some projects is giving away tokens in exchange for promotions in doing bounties and airdrop but it is only a small percentage of the token supply. This will help them gain some exposure and encourage some investors.

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▄▄▄▄         Whitepaper       Telegram       Twitter       Medium       Reddit          ▄▄▄▄
smt_red
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August 08, 2018, 06:43:41 AM
 #8

ICO collected a maximum of 10-20 million US dollars. Now in some cases, the account is already about hundreds of millions.
https://habr.com/post/339822/
shitcoinoffering
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August 08, 2018, 09:02:35 AM
 #9

Unfortunately, no( All sites which put ratings for ICO projects do it by some features like design, whitepaper, etc. But they do not analyze them at all - they take their fees for promotion and that is how it works. If you want to analyze ICO, do it yourself! Or you can write to me and I will analyze it for you for free and honestly. Because I want to make our cryptoworld better.
You can read our works here - shitcoinoffering.com
pavelhod
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August 08, 2018, 09:43:35 AM
 #10

Interesting read from forum author, thanks for some good insights.

I feel that maybe there needs to be some kind of scam to actually exist and, terribly some people need to lose money actually. You can't just throw money at projects and expect them to work either. I bet that most people don't even read whitepaper and not really even know or understand at least how cryptocurrency works in the first place. Whilst I agree with your comment, I believe education is a big factor and if you don't know how bitcoin or another project works and you see a cool new ICO that promise lots of stuffs then immediately think its cool and a great investment.

My point is, there will always be fake ICOs. There is money in it and naturally criminals too. Education, ie reading white papers is essential and this is just simply not done enough by investor. If you don't DYOR you may as well spend money on roulette. This is just my opioin and I know that ICO scams are more sophisticated now but I feel that basic principal (like understand the mecanism and market first) would really help.
joulion86
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August 21, 2018, 01:58:59 PM
 #11

I stumbled upon a nice idea for checking fake ICOs, which I added to the check team point.
Link to the idea and original thread:
https://bitcointalk.org/index.php?topic=4586576.0

Discoperi
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August 21, 2018, 03:00:19 PM
 #12

First of all you need to check everything. A good method is to look up for the partners of the particular project, especially on their marketing agency. Usually, blockchain startups don't have their own marketing department, therefore they hire other companies to do PR, marketing, content creation, community management etc.

So check their website, their LinkedIn's and all those stuff.
So you may use the same scheme to check out the ICO projects and determine, whether are they scams or not.
crypt0j0e
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September 14, 2018, 01:38:40 AM
 #13

1. Check their team, don't trust an inexperienced team. Check if team members are fake with Imagesearches.

I completely agree with everything mentioned in your post. I also like the fact that your trying to educate people that are just entering the crypto space about scams and fake icos. #1 in your list is absolutely critical because the team is what drives the project to success or failure.

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September 14, 2018, 08:38:41 AM
 #14

There is a difference between a fake or scam ICO and a failed one.
A project can have experienced team members, and a viable working product and stood fail in the market. There is no way to determine the success or failure of a project during the TGE, you can only verify the legitimacy of the project. And go with the potential in it
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