Tips for Avoiding ICO Scams

Investing in a new Blockchain or cryptocurrency project can be very profitable. It can also be very risky.

As the crypto winter ends and a crypto spring begins many people are turning their attention (back) to Initial Coin Offerings (ICO) as potential investment opportunities. As lucrative as ICO investing can be, there are also serious risks. This is partly why some governments have restricted ICOs within their territories. The South Korean government recently banned ICOs.

What is an ICO?

ICO stands for “Initial Coin Offering,” which is when a company creates its own cryptocurrency and starts selling it to the general public. This is done to generate some capital for the company so it can invest in the future development of the project. Almost all altcoins on the market today were at some point sold as part of an ICO. Though there are notable exceptions, like Ripple (XRP).

IEO stands for “Initial Exchange Offering,” which is when a company starts selling its cryptocurrency to the public on an existing digital exchange. For example, BitTorrent held an IEO on Binance, and soon, OCEAN will hold one on Bittrex. IEOs can be more trustworthy than ICOs because the project has at least been vetted by the exchange hosting the sale. However, this is no guarantee.

Why Ban ICOs?

To understand why a government would ban ICOS requires knowing some history. ICOs were at their most popular in 2016–18 when the most recent crypto bull market was at its height. Bitcoin had surged to record-breaking highs (over 20k USD) and investors were looking for new altcoins hoping to make 10x, 100x gains. At the same time, some dishonest people took advantage of the opportunity and created scams, either ICOs that were doomed to fail or ICOs that were simply fake. Many people were victimized by these scams and some governments felt the need to get involved. For example, one government in Canada created its own ICO scam website with the goal of first attracting and then educating potential investors. Some government — like South Korea — went as far as banning ICO completely.

Since the initial ICO craze, the crypto markets took a beating. People have called this the “crypto winter.” However, it is now looking like the season is starting to change and a crypto spring has sprung. This means that investors will once again be looking for the next best cryptocurrency. It is important to avoid getting scammed.

Based on watching several projects over the past few years, I have some advice to help others spot ICO scams.

Read Reviews Written by Others

No matter how much you know about cryptocurrencies, it is always useful to read other what other people have written on the projects you are thinking of investing in. Reading multiple reviews makes it less likely you will miss important information.

However, it is necessary to put this advice in context. ICO reviews have some disadvantages.

First, there are websites that review ICOs that are also paid by ICOs to put a positive spin on what they post. There have been cases of these sites reviewing ICOs badly on purpose, and later approaching the company in question to ask for money in exchange for making the review more positive.

These problems are common in traditional financial markets as well. However, the problem is much worse in the cryptocurrency world because of the limited regulation.

How to Interpret Reviews?

Since a positive or negative assessment in an ICO review is unreliable, my advice is to simply ignore the opinion of the reviewer. Simply, look to see if you missed anything when doing your own research. I only use reviews to look for new information. I do not pay attention to the recommendations of the writer. This approach helps avoid being influenced by a biased review.

Research the Company

To make a good investment decision it is necessary to research the company behind the ICO. This does not mean just looking at the technical aspects of the project, but also the business plan and past experience of the team behind the company. A solid business plan and a team with an established track record are good signs of future success.

One place to find this information is on an ICO’s website. In most cases, the staff of the project will have links to social media accounts. You can visit their profiles to determine if they are real. If there is no information about the team, the ICO should be avoided. The lack of transparency is a bad sign the ICO might be a scam.

If the project developers are experienced you may also be able to look through their previous work on Github (a repository where developers maintain a portfolio). If a developer doesn’t have a Github Page, they may be a beginner but could also be a fake.

It goes without saying, you should make sure the company itself is real. The best way to do this is to see what country it is registered in. Check for an address and other contact info. Sometimes scammers completely ignore these details.

The Whitepaper

A whitepaper is a crucial document for any blockchain project. It presents the overall vision and structure of a project and details about the token. All relevant information should be included and the writing should be clear and accessible.

Main points to look for when reading whitepapers include:

  • Why the project is being made? What function/service(s) will it provide and to whom?
  • Is the coin or token connected to the project necessary to the purpose it is being made for?
  • The timeframe and structure of the ICO
  • How the funds raised from the ICO will be used

If any of the above is missing from a whitepaper, it is not a good sign. Other warning signs include grammatical mistakes, broken links and copied content.


There is a lot of profit potential in ICO/IEO investing, but it is also highly risky. Lots of people have lost lots of money through unwise ICO investments.

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