Warning: There are A LOT of IPO Scams

  • 19 September 2017
  • Jesse Parker

With the recent success of multiple ICO's raising millions of dollars, it's no surprise that scam artists and greedy businesses are flocking to the idea to try and make a quick buck.

Crowdfunding is booming! Taking the power out of the hands of middlemen, average consumers can now put money into projects they believe in, either as an investment or to receive exclusive merchandise. It is nothing new, but has gained a fair amount of traction recently with multiple successful ICOs and token sales. Bancor, which raised over 153 million in just 3 hours with their ICO is probably the most known. Many, not so savory, programmers and businessmen noticed the success of the campaign and decided they would also like a piece of the pie.

With such a low barrier to entry, many are getting involved with creating their own coins, which, are meant to simply make a small number of people behind the ICO money. With so many coins being released it's hard to keep track of which ones are legit and which ones are just a basic pump and dump scheme.

What to watch out for?

Scammers love buzzwords! As CryptoCompare put it

Our decentralized blockchain-based platform will disrupt the landscape of cryptocurrency investment while building a trustless network of pseudonymous users that leverage swarm intelligence technology to provide real-world financial services in a tokenized ecosystem.

Now, this sounds great, right? Well no not really, it's basically just word vomit with fancy words to trick you into thinking they are doing something different that will have value. It won't. It could be a fancy marketing trick to get a greater number of investors, the best place to start out is the whitepaper.


The Whitepaper!

The whitepaper outlines how the projects work, and can get pretty specific, having charts, graphs and sometimes simulations. If the whitepaper you are reading just has bold claims with no information backing it up or showing how it works, then that is a major red flag. You can make whatever claims you want to on the whitepaper, so just remember to do your homework.

The Code!

Not every ICO releases their code, just the good ones! If the ICO you are looking at doesn't have the code behind the project listed, walk away. Having code published doesn't necessarily mean that it is legitimate either, if the code is just a clone of another token with minor changes, you are better off not investing.

The Team!


The team is only as strong as its weakest member, right? Well, what if the members are fake? You should completely avoid projects who don't show off the talent behind the project. It brings validity and peace of mind knowing that talented engineers and programmers are working on something. This doesn't stop scammers from creating a fake team. It isn't hard to just get a stock picture from a site like UIFaces, giving them a fairly common name and an impressive resume. Some even go in depth enough to create fake social media profiles for the fake team members.

The Escrow Service!

This is probably the biggest one of all! If the token sale doesn't have an escrow service, DO NOT participate. Escrow helps protect the buyer and seller by keeping the funds with a 3rd party until certain parameters are met, this could be the completion of the sale or them being released back to the investor if the ICO failed to raise enough. Remember to research the type of escrow the company is using, if something seems off or if you aren't comfortable with it, it's most likely a scam. The best escrow plans seem to be the ones where funds are released based on development progress “X% on distribution, Y% on beta release ect..”

This can all be very overwhelming especially to those just starting out with cryptocurrency investments. Just remember to be smart, do your research and trust your gut and you should be able to avoid the hundreds of scammy tokens out there.

About Jesse Parker