Investing in ICOs: How to Spot an ICO Scam

Anything that sounds too good to be true usually is too good to be true. If you know how to spot an ICO scam, then you stand a better chance of investing in a good ICO that will not, at the very least, run away with your money before we even talk about making any returns.

There are thousands of ICOs out there with each one of them promising you almost exactly the same thing as the other – huge returns on your investment. This is what you want to hear because your money is on the line. You want to make it work for you. Investing in an ICO or any other financial instrument is not in black and white, you may lose all your capital or smile all the way to the bank.

As they always say, only invest money that you can afford to lose. This is the golden rule and will always remain a standard. The purpose of this article is not reminding you that but to give you tips on how to spot an ICO scam.

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How to Spot an ICO Scam

A report published in August 2018 by research firm Diar revealed that investors have lost nearly $100 million in ICO exit scams. In the six months since the publishing of this research, this figure has risen.

What this means in the simplest of terms is that the crypto landscape is a garden of roses and thorns. The trick is to separate the thorns from roses and this is what we hope to achieve by the end of the article.

Here are the tell-tale signs of an ICO scam.

Dubious, Dysfunctional, or Poorly Made Website

A website is a window to any company. It gives you a preview of what they have to offer and how far they are willing to go to deliver the product or service. Many firms are investing a lot of money in developing fast-loading and fully functional websites.

ICO websites are not exempted.

Many cheap and poorly done websites are the hallmarks of scams. Some of the websites even use pictures obtained from other sources on the internet. Some of them are simply templates with minimal customization.

A decent project should invest in is a state-of-the-art website that ticks all the boxes such as speed, user interface experience, design, etc.

Team Profiles

Every company takes pride in the people behind it. Companies have sections on their websites that are dedicated to key executives and their professional background. This gives immense credibility to the companies and improves their chances of landing prospective clients.

The same goes for ICOs.

A scam project creates fake bios for its team member profiles. Some go to the extent of adding people who are not part of the project.

You should be able to find the members of ICO projects on social media platforms such as Twitter. Checking their LinkedIn profile usually serves as the best starting point.

Undefined or Unclear Objectives

Every crypto project is a solution to a problem. First, it should be able to describe a challenge or problem followed by a clear brief of how the project proposes to solve the problem.

Some new projects are entering a market that is already crowded with other participants. Their only selling point is how effective they are at solving the solution in comparison with their competitors.

A project that does not clearly define its purpose of existence is a red flag.

The goals of the project must be realistic and not sound to too good to be true. Exaggerated claims normally equate to zero-delivery.

The Company Behind the ICO

There is normally a company behind an ICO.

Your duty is to research if the company behind an ICO is a legal entity. You can find this information from the ICO’s website or searching company registration databases. This is for double-checking purposes and verifying that companies are who they say they are.

It is also advisable to invest in an ICO whose parent company is registered in jurisdictions such as Malta or Switzerland where ICO guidelines are favorable. The last thing you need is to see an ICO project you invested in being involved in legal battles.

White Paper

An ICO white paper should be written in a true Satoshi Nakamoto style. Satoshi’s nine-page white paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System” should serve as a good template for writing a well-thought-out and straight-to-the-point white paper without marketing material.

A white paper should be fairly technical in nature with little to no marketing lingo. A proper white paper should not entirely rely on graphic design but on the validity and merit of the technological points raised.

Distribution of Funds and Token

An ICO project worth its salt should be clear about the total token supply and how they will be distributed. The ICO founders should not allocate a large portion of tokens for themselves. The founders should allocate a few tokens so that the project can be as decentralized as possible.

The ICO project should clarify how it plans to use the funds raised. The capital raised is usually used to fund the development of the promised product. An ICO that does not think in this way could very well be a scam.


A roadmap is a simple way that the ICO project uses to describe future developments and when they will take place. The roadmap should be realistic and not “promise the impossible.”

An ICO project without a roadmap or one that fails to meet its own targets should not be touched.

Conclusion: Regulation is on the Way

ICOs have largely thrived in a legal vacuum, but things are changing. Regulatory agencies around the world are flexing their muscles in a bid to stamp out exit scams and protect investors. The market itself is nascent and regulators are still trying to understand the evolving landscape.

The onus is on investors to do their due diligence before investing in an ICO project. The ICO market is no longer the Wild West it was two or three years ago, but it still has a long way to go before it is completely free from fraudsters.

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Joe Riviello -Chief Operating Officer- As a technology development and marketing expert, Joe creates engaging, conversion-centric e-commerce experiences and cutting-edge solutions that maximize growth and profit. Joe is the founder of Zen Design Firm, LLC, a 10 year old web development and marketing company designated by e-commerce giant, WooCommerce, as one of just a handful of experts in development on the WooCommerce framework. Joe also serves on the Board of Directors for the Northeastern Economic Development Company and has advised multiple Fortune 500 companies on strategic growth initiatives with a specialization in digital marketing channels.

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