Following the emergence of Bitcoin and other cryptos, the world of digital assets experienced a sudden explosion of interest not only among institutional investors but also among fraudsters. Regarding Initial Coin Offerings (ICOs), there were a lot of crypto scams involving the disappearance of startups after their founders had collected significant amounts of funds. Even though investing in ICOs might be risky, it is an exciting new way of fundraising. Some crypto experts even believe ICO has the potential to replace the established VC-driven funding for crypto startups.
As you already know, cryptocurrency scams are frequent, and sometimes it is pretty challenging to spot a dubious project at first glance. To make sure you are planning to invest in a potentially promising crypto project, you should learn to be aware of different red flags. That is why you can find many articles on the PointPay blog and PointPay Medium with tips on avoiding cryptocurrency scams. So today, let’s find out more about ICO scams, sketchy tokens, and how not to invest in untrustworthy crypto projects.
What are Initial Coin Offering scams?
An ICO scam is one of the most common types of cryptocurrency scams. The project founders ask potential investors and crypto enthusiasts to invest in the new project and promise they will receive virtual ‘tokens‘ in return for their money. During the real ICO, once the crypto developer acquires enough funds, the ‘token’ goes live, and users can trade it. However, in the case of an ICO crypto scam, after the fraudsters receive funds, they disappear, leaving the investors empty-handed.
Spotting an ICO crypto scam with PointPay
There are many ways to recognize a crypto scam, from doing your own thorough research to asking yourself several important questions. Here are some of the tips that will definitely help you out.
Ask yourself several questions and do your research
Yes, here is the first tip from PointPay experts. To make sure you invest in a worthwhile project, ask yourself: Do you understand the project? Will it potentially provide real value? Does the project really need a blockchain?
Understanding if a crypto startup has a real use case is essential. When it comes to ICO crypto scams, fraudsters behind the project are just using lots of crypto industry buzzwords to attract potential investors' attention. To understand if the project is trustworthy, you need to dig deeper and thoroughly check all the information you can find online.
Check the team behind the project
Undoubtedly, talents who come out of nowhere with no experience in the industry can have brilliant ideas and can be busy launching the next high-profile project. However, it is much more likely that you will be scammed by someone you know nothing about than by well-known crypto entrepreneurs and developers. Therefore, check the ‘About us’ section on the project’s website. If a project is trustworthy, you should be able to find the team members’ photos, bios, and other information.
Check if the founders are engaging with the community
The founders of exciting crypto projects are undoubtedly very busy people. However, passionate and enthusiastic professionals who create something unique must understand that genuine engagement with the crypto community is essential. The founders of real projects care about keeping the information flow going. Some can even be contacted directly via Telegram or another social media channel. If the founders are staying anonymous, and there is no news from them, you might be dealing with an ICO crypto scam.
PointPay experts want to remind you that even if the project meets all the important criteria, there is no guarantee that it will be successful in the future. However, being cautious will allow you to avoid most dubious ICOs built only on hype and recognize crypto scams on time. By identifying fraud before you fall victim to it, you are more likely to invest in a potentially promising project.
Stay safe with PointPay!
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