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Today, Business Insider provided some useful tips to help you try to spot a cryptocurrency ICO scam.
These scams are on the rise for two reasons:
- Tales of instant cryptocurrency multi-millionaires have fired the imagination of main street investors who want to get rich easily. They have read stories of people who have purchased ICOs early and ridden the price rise to early retirement and a carefree lifestyle. They want to be one of those people but they don’t want to do the dirty research work required to intelligently pick an potentially good ICO.
- Crooks are quickly discovering that they can easily capitalize on reason #1 by creating ICOs – or at least the appearance of an ICO.
An example of a typical scam is an ICO which promises riches to the investor. But it is only a classic Ponzi scheme. Early investor funds are partially used to pay off later investors. The founders keep skimming off some of the invested funds into their own pockets. Then a day comes when they are discovered for the scam they really are. This discovery usually happens because new investors stop coming in and the ICO is no longer able to maintain their payouts. At that time the founders of the ICO disappear with a bank full of coins.
In other cases, the founders don’t even bother to pay anyone at all. They just collect the investor’s money and then disappear with it all when they fear they will be caught.
Investopedia reported in April 2nd that a study by the Satis Group estimated that up to 80% of all ICOs are either scams or simply quickly failed after launch. In both cases, investors lost all of their investments.
When choosing an ICO to invest in, there are many factors to analyze, and many to beware of. Here are some of the “be wary” tips identified by Zoë Bernard at Business Insider US:
- If the company appears to be run by a team of beautiful women, then be cautious.
- If Vladimir Putin, the president of Russia is claimed to be involved, then be cautious.
- If the ICO white paper is very vague about how the blockchain will work, or it just seems to use a lot of buzzwords that don’t really explain anything, then be cautious
- If the ICO company website looks TOO slick and professional, then be cautious. ICOs are usually startups and don’t typically spend a lot of their money on their website.
- If the company website seems to be run by one person, or you can’t validate the names of the people listed, then be cautious.
Now the question is, will you do your due diligence before investing in that next get-rich-quick ICO?
Read the full Business Insider article here
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