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ICO Fraud: Four Ways to Spot Cryptocurrency Scams and Fake ICOs

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As with any industry, the increased popularity of the digital currency industry created an emergence of bad actors operating in the space. As digital currencies continue to grow in popularity, it’s important that investors and proponents take measures to ensure they’re engaging with legitimate projects so they don’t get caught up in cryptocurrency scams or fake ICOs.

While there are many genuine projects and actors, differentiating between scams and legitimate innovation can be difficult as the lines are often blurred in today’s landscape. For this reason, it’s important to understand metrics that can help differentiate between good projects and potential scams.

Pay attention to known threats

Initial Coin Offerings (ICOs) emerged on the tail of the digital currency movement as a way of allowing innovative projects to secure funding through the sale of supplementary tokens. However, with ICOs presenting great success, many opportunists saw potential for easy revenue.

According to findings from, 258 ICOs raised over $2.5 billion CAD in the first two months of 2018. However, less than 41% of these projects succeeded.

This is to be expected in an industry with a sudden boom in popularity as intentionally deceptive projects join the ICO craze hoping to make quick money. These projects attempt to exist undetected through blending in with genuine projects in order to deceive investors.

The popularity of ICOs – and ICO scams – played a large role in the digital currency industry’s first inclusion in the Better Business Bureau’s annual list of threats to investors. The bureau called digital currency related scams 2017’s 5th most prevalent type of scam for Canadians.

Act rationally, avoid getting swept up in the funding craze

With a large volume of money flying across the digital currency landscape, it can be easy to get swept up in the craze. While a project’s financial backing can help to indicate the community’s faith in the project, it can also create a false impression of the project’s likeliness to succeed.

With some ICO’s failing or otherwise seeming unable to deliver on promises to investors, a rise in ICO-related lawsuits is taking place. A recent example involves the Moss v. Giga Watt case that will be brought to a United States district court. In this case, the plaintiff alleges that Giga Watt “failed to timely issue” tokens to customers after its ICO.

Do your own research and investigate project teams

Doing your own research is in an important part of self-assessing the merit of a project. It’s up to individual investors to ultimately decide which projects they are able to trust, and first checking for red flags is one of the most important tools at any investor’s disposal.

Often, investigating the team behind a project will help to remove bad actors from the conversation.

As The Next Web reported, a recent project called MIROSKII raised substantial funding in its ICO, despite the team appearing remarkably fake. The gallery of the project’s team members involved a picture of notable celebrity Ryan Gosling, listed under the name Kevin Belanger. Further, CNET uncovered that almost every photo used in the project’s “staff” belonged to an individual with no ties to digital currencies.

While the story is humorous in retrospect, investors could have saved themselves from loss had they spent time investigating the team. While you shouldn’t necessarily dismiss industry newcomers, evaluating the team can help identify its intent – especially when other things don’t seem to add up.

Listen to more than once source

To help the public avoid pump-and-dump schemes, the U.S. Securities and Exchange Commission (SEC) recently outlined how investors can protect themselves. The SEC advised investors to avoid engaging with online pump-and-dump groups, and to never trust information from a single source.

Information that comes from a single or unverifiable source can often be manipulated, and false stories can impact a project’s perceived value.

Further, scams often overpromise, banking on the success of other projects and word-of-mouth to confuse investors. These projects offer significant rewards, which consumers believe to be legitimate due to the previous success of genuine projects.

While there are a few cryptocurrency scams and fake ICOs out there, the digital currency industry is full of great people trying to do and achieve great things. However, if something seems too good to be true, it probably is.



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