How to Identify Cryptocurrency and ICO Scams


There are so many cryptocurrencies that are launched every week and with these new cryptocurrencies, there are possibilities of coming up with initial coin offerings (ICO). As we know that cryptocurrency is getting mileage day by day since its inception. Some of these coins are very famous and growing exponentially. Additionally, these coins are highly volatile as compared to other financial assets. Due to the nature of high volatility, it attracts speculators, traders, and investors as well as fraudulent as well. Many tokens are not legit and investors get trapped by fake cryptocurrency or ICO. Therefore, we must know to identify fake crypto coins and ICO.

What is cryptocurrency?

Cryptocurrencies are digital currencies in an encrypted format. They are those kinds of digital currencies that facilitate users to make payments right to each other through the internet. Cryptocurrencies have been adopted by a few countries as legal tenders. There are several cryptocurrencies – the most well-known of these are Bitcoin, Uniq Token, and Ether.

What is ICO?

ICO is an abbreviated form of initial coin offering similarly to IPO (Initial Public Offerings) in the share market. These are thought to be 'fundraising techniques' used by companies and new startups. New companies willing to raise fund to create a new token, application, or service creates an ICO as a mode to raise funds from the market. The key difference between both is that IPO is usually for well-established businesses, whereas ICO is usually for the newcomers. Even though, some of the ICOs have generated immense earnings for their investors and also various others have been convicted to be frauds. We can say that frauds are very common in the crypto industry.

Type of Scam in Cryptocurrency and ICO

1. Bounty Scams

When ICO fails to return their promoters who were assured monetary benefits. At initial, scammers promised to give good returns on investment. They collect the money from promoters but in the end, they don't give any returns and make so many excuses.

2. Exit Scam

These are very common scams done by fraud. They ask for money for ICO sales and promise to bring good services or coins but they close their organization suddenly without proper reason or informing their investors. In 2018, it has been reported that more than $100M in capital raised to ICOs was stolen and this is an example of an exit scam.

3. White Paper Piracy Scam

These are very active scammers who try to copy the famous ICO and shows that they are the real one and try to cheat investors by asking for money for ICO. Victims get trapped by their lucrative ICO.

4. Ponzi Scheme

Ponzi schemes means highly lucrative schemes which attract any investor to buy their crypto coins and ICO. Such types of schemes are a highly profitable and good return on investment but they scam the investors by collecting their funds and never returning.

5. Exchange Scam

For deceiving investors, when software developers design to launch their ICO at a fake cryptocurrency exchange and try to collect money from investors for crypto coin or ICO.

This kind of scam is called an "exchange scam."

6. URL Scams

Fake websites are developed to scam the money from investors as this website claims to deposit money for buying coins or ICO or other services and once user deposits the money, then they never return or give coins, ICO, token, or any services. Such types of scams are called URL scams.

Identification of Such Scams

1. Go through the whitepaper

This is advised to read all the white papers of the organization to get a clear idea of the background, objectives, policy, business facsimiles, business SWOT analysis, and the timeline for execution of any blockchain-related task.

2. Understand the project

After reading the project, you should try to understand the feasibility of the project and the execution mechanism. The fake project will be highly lucrative to attract investors as their plan of execution will be so easy to achieve and they don't do a proper SWOT analysis. You can easily track whether the project is achievable or not.

3. Thoroughly Understand the Team:

Last but not least, you must try to know the background of the promoters or team behind the organization. Fake companies don't have a good team or well-known person in the team. They will have new faces to cheat the people so you must look at their profile with help of Google, social media et cetera.


Due to a lack of information in the market, developers’ tricks to scam money on the name of cryptocurrency, tokens, or ICO. Therefore, this is highly advised to do due diligence before investing in any of the above fraud schemes or companies. Always try to learn as much as possible about cryptocurrency and its legitimacy so you may not get trapped by such scammers.


Receive the latest
news about
our journey