Common Distribution Channels
Report Your Incident
Help us to help the community. Report your incident to us if you are the victim of a crypto scam
Commonality: Fairly common
Easiness To Spot: Difficult
Don’t get caught off-guard.
Subscribe to get crypto scam alerts.
What Are ICO and ICO Scams?
If you are considering in investing in ICOs, we recommend you to do a quick reading of angel investor Jason Calacanis’s open letter. Deciding which ICO is a scam is a tricky question, as all ICOs, in general, are very high-risk investments.
ICO stands for Initial Coin Offering. It has become an increasingly popular way for blockchain companies to raise funding using the power of blockchain. However, in contrast to IPO (Initial Public Offering), where public investors purchase shares and a percentage of ownership of a public company, ICO participants receive an amount of “utility tokens” in exchange for their investments and generally receive no dividends, have no ownership or voting rights for the company and the project.
Companies who use ICO as a way to seek funding often are very young and have no working prototypes. Thus you are essentially investing in companies based on their white papers, which is just a list of ideas and dreams. There are also currently little to no regulations regarding how the ICO company can spend its funds in most countries.
Due to the above reasons, ICOs are considered high-risk investments even when they are backed by legitimate teams with the best intention to fulfill their investor’s expectations.
We will not list the ways to rate and conduct due diligence on ICOs; you can find a list of good 3rd party resources on our crypto resource list under “ICO investments”. Some popular sites are:
However, due to the popularity of ICOs among investors, top ICOs can raise millions of dollars with essentially no strings attached, often in a matter of days. This has attracted significant interests from scammers and hackers. They view ICOs as an easy and fast way to make off with some handsome income.
There are 2 main ways ICO scams are carried out: Fake ICOs and Hijacked ICOs.
Definition: ICOs with fake claims and fake team members. The ICO initiators have absolutely no intention of building projects and fulfilling their promises to investors.
This type of ICO scam is not too hard to spot if you take your time to conduct some due diligence, which you absolutely should if you intend to invest in an ICO. Below are the 3 tell-tale signs for a fake ICO:
Project’s white paper lacks program details and provides no meaningful development timeline. There may be no white paper at all.
The first red flag for an ICO is that the project white paper is very vague regarding the aim of the project and how exactly the team plans on achieving the benchmarks. Sometimes, there may be no white paper at all.
During ICOs, you are essentially investing in ideas that stem from the project white paper. So, if there is no white paper, you are essentially investing in nothing. You will never invest cash in a real-life project without seeing a business plan first, so why should crypto investing be any different?
A great and trustworthy ICO project should also provide regular project updates through its blog and social media channels. The project members should be transparent about their progress and their challenges.
Lack of information about the project’s team members and advisors.
Do not trust any ICO project that does not have real team members and advisors listed.
A trustworthy crypto project’s members and advisors should have established social profiles, such as LinkedIn profiles, that can back up their identities and work history.
It is also a smart move to check out project advisors’ social profiles, such as their Twitter accounts, to see if they are indeed the advisors for the said project.
If you can not find any public information and work history regarding the team members or advisors, it is a huge red flag. Ask yourself why the team members and advisors do not wish to be identified if they are taking millions of dollars from investors. Only scammers do that.
Majority of non-investors consider the ICO a scam.
If there are lots of people with no association with the project consider it a scam, it is likely that they are right. Sometimes you have to listen to the wisdom of the crowd.
A great project should have a strong and supportive community. It will be very hard for it to succeed otherwise.
Definition: This type of scam typically uses one or a combination of phishing strategies to lure investors to transfer coins to a fake wallet address controlled by the scammers during a project’s public token sale.
ICO hijacks seriously hurt both the investors and the ICO company, as both parties are at a huge loss: the ICO company loses the investments they could have received, and the investors do not receive the new tokens they purchased.
Educate yourself about common phishing strategies can help you to navigate through the muddy water. Most scammers spread phishing site URLs and fake wallet addresses pretending to be legitimate companies through emails, messages (Slack, Telegram, Discord) and social media (Twitter, Facebook).
When in doubt during token sale time, you should reach out to the project directly. You should contact them through their official Twitter account or support email to confirm the contribution wallet address. The project support team should be the most active in responding to investor inquiries during the token sale period.
And as always, if you suspect something is not right, report your ICO scam to us here and with the ICO company directly!
Kik ICO and BeeToken ICO hijack
Kik is a popular social messaging service with an international presence. Due to its established status, Kik’s ICO attracted the attention of many institutional and public investors. During Kik’s token sale period in Sept 2017, a fake phishing URL for the sale circulated through copycat Twitter accounts. The fake profile was able to accumulated over 70 ETH in a matter of hours, worth over $20,000 USD at the time.
BeeToken, a company wishing to build a decentralized version of AirBnB, had two successful pre-sales. It raised $10 million from Dec 2017 to Jan 2018. This success certainly caught the attention of many, from both the good and the bad.
During the project’s public token sale in Feb 2018, a fake email was sent to investors who registered for the token sale event. The email included a fake wallet address for token exchange. In a matter of 25 hours, it reportedly stole over $1 million worth of ETH.