Financial markets are currently tightly regulated and for this reason fraud is becoming increasingly rare. Scammers are currently flooding the field of innovation and switching operations to the field which is still not regulated – the world of digital currencies. And while authorities are trying to somehow legitimize this new, highly promising spectrum within the regulatory framework and extend oversight over the activity of blockchain and cryptocurrency business, many have been far off the radar of regulatory watchdogs and continue to capitalize on the nativity of inexperienced users.
Initial coin offerings, or ICOs, present blockchain-based businesses with an innovative financial model that circumvents traditional funding process, allowing them to access startup capital generated through crowd funding processes. ICO investors benefit from the opportunity to create significant amounts of profit while supporting the development of disruptive decentralized platforms. And while some ICO, like Ethereum have paved the way for great future, many others have been fraud at its core and did nothing aside from stealing investors’ funds. Below are some examples of famous SCAM ICOs.
The highly popular trend recently, called the ICO had been in the radar of financial watchdogs. Plex ICO has been halted US Securities and Exchange Commission (SEC) in response to an official complaint that founder Dominic Lacroix was defrauding American and Canadian investors. All funds raised since the start of the ICO have been effectively frozen by Security and Exchanges Commission.
Another scam ICO was the Benebit, which was initially advertising the usage of proprietary blockchain technology to unify customer loyalty programs. The whole venture initially had all trappings of highly legitimate process – an advertised telegram channel with user base exceeding 9000 and the marketing budget of $500,000 for advertising the event and token presale proceedings. Having generated a good deal of hype with quite hefty marketing budget at their disposal, scammers were close to defrauding credulous investors but the deal was cut at its core as information resurfaced that the whole thing was a wildcat venture. It was revealed the passports of so-called founders were fake and that the photo of supposedly team of founders was stolen from UK school. Following the disclosure, the team started packing things fast, winding down website and all ICO-related documentation. Despite the timely response to the scam, the perpetrators were able to get away with from 2$ to 4$ million stolen from trustful investors.
Shady projects never stop coming
The example of fraudulent ICOs can carry on from here. But we would like to warn potential customers to check ICOs very carefully before deciding to put money there. For example, recently being active on the internet is so called NCRYPTO.io, which describe themselves as a tool to simplify and economically optimize interactions between business and individuals. Rather than offer another way of crowdfunding or running so-called ICO (Initial Coin Offering). NCRYPTO.IO is being presented a mass-market product that can simplify the engagement of massive numbers of users into capabilities that the Cryptoeconomy gives. Nothing even remotely criminal, but at a first glance at their website you just notice what kind of a slapdash workmanship the website is.
Having analyzed their website with popular service Whois.com worrying signs immediately come to the surface. The first obvious cause for concern is that their website has been in existence for only 15 days, the website registration date stated at 15.03.2018. The next thing is that their website is apparently registered in Panama, a shady tax heaven for all sorts of illicit activities. While many corporate business are registered in Panama, is quite strange for a team of founders of supposedly Russian origin to choose panama as their website registration location.
And below is the team of founders.
While they have existing Linked in accounts, LinkedIn has a history of fake account registration though company has measures in place to deal with accounts like that. We have no proof whatsoever that the whole venture is a shady business aimed at hit-and-run cash grab but the information we have been able to obtain so far speaks for itself. Anyway, we would like to encourage potential ICO users to be careful when dealing with ICOs simply due to the fact that there is so much shady business happening in the field.
Below is the list of signs which will help you spot SCAM ICO:
1 Poor presence in the internet
One of the key factors to take into consideration when assessing the legitimacy of and ICO is the background of the individuals behind it. A solid initial coin offering will provide comprehensive information to potential investors, including list of founders, their names, background etc. Having detailed team breakdown is not enough to understand how the ICO legitimate is. Scammers are fully aware of that and are trying hard to make the whole venture look fully legitimate. Make sure to check social network accounts of all members and check if the account has a long history with ICO listing included in the profile. If you spot recently created account with no information pertaining to the cryptocurrency activity or information looking outright fake – make sure to run away as most likely you will be caught by scammers should you decide to move forward with investment.
2. Guaranteed Profits and High bonuses
Off all the signs that point to the potentially fraudulent ICO are high profits and bonuses. There are no certainties in the blockchain system and no reliable way to make sure the profits will roll on predictable curve. Here is the screenshot from Ncrypto.io website promising bonuses as high as 100% for early participants of token pre-sale. This is not matching standard ICO practices.
3. No White Paper, Bad White Papers, or Blatantly Plagiarized White Papers
A white paper is the most important element of any initial coin offering. In a white paper, an ICO will present an outline of what it plans to achieve, a breakdown of how the technical aspects of the platform function, and delineate its token distribution model.
If an ICO doesn’t provide a white paper, then it’s undoubtedly a scam. Simply providing a white paper, however, is not a clear sign that an ICO is legitimate. Some fraudulent initial coin offerings pay online freelancers to write up hilariously bad white papers under the assumption that providing a PDF white paper document is enough to fool most investors.
4. No Roadmap or Confusing Roadmaps
Initial Coin offering team will generally provide investor with the information showing what they have achieved so far with the underlying technology behind the ICO. This is similar to the IPO( initial public offering ) when the company who is planning to become public open its books and gives perspective to potential investors. Investors are unlikely to invest in those companies which have poor record and who balance sheets are building generally unfavorable picture around the company planning to go public. The same is applied to the ICO. Those behind the project should have a detailed roadmap and outlining current achievements and plans for the future. If they don’t have roadmap at all there is high likelihood they have no plans whatsoever, only exit and profit.
The road map should be clear, realistic and provide plans how the technology behind the ICO will be implemented. The Ethereum ICO was supplied with realistic road map supplemented with future plans and predictions and just look where the project is now – Ethereum is second biggest digital currency after bitcoin with current market capitalization of $40 billion.
Good ICO should have websites outlining all about the project, links to social network accounts of founders and other useful information. When the website is outright bad, is very likely that simply not enough effort was put into building it. Just have a look at the screenshot from Ncyrpto.io where missing letters in words is the commonplace.
And this website is representing the project which plans to raise $8 million, according to data on trackico.io
As we have already mentioned in the article, we are not claiming to be the sole possessor of ultimate truth and understand that information provided here is not enough to say that Ncrypto is scam. But we have noticed that the project has some key signs identified in this guide.
Basically, the easiest way of resisting the temptation to jump into another promising ICO venture is to use common sense. Never act on the spur of the moment, analyze everything carefully before going ahead with investment. If an ICO looks unrealistically profitable and promises something that cannot be guaranteed (like high profits or bonuses) then most likely you have stumbled into scam.
Checking if the ICO match any of the following criteria is the key to cutting through the endless bombardment of promising ICO and identifying the right offer.