The traditional financial markets are heavily regulated, so the fraud is very difficult to realize a Scam on the stock exchanges and to avoid trouble. However, the cryptocurrency space is different. The market is replete with suggestions that actually turn out to be pyramids and phishing schemes, leading participants to lose money.
In the last year more some scams in industry has focused ICO due to the ease of organizing campaigns to collect money while maintaining anonymity. Recently, researchers Satis Group estimated that 81% of all ICO organized scammers. As the concept of ICO, fraud in this area is a relatively new phenomenon, which, however, has led to multimillion-dollar losses to investors who invest in cryptocurrency startups unreliable.
The last known cases of fraud
One of the most notorious fraudulent ICO this year was the disappearance
startup LoopX that was missing from the cryptocurrency space along with focused on ICO bitcoins and esters 4.5 million dollars. The concept of startup was promising – the team promised «the most modern algorithm of trade on the cryptocurrency market.» However, in the process the ICO the company closed the website in the Internet, has removed all traces of existence in social networks and evaporated together with the collected funds.
Perhaps the only good news in this story is that the fraudsters do not have collected 12 million dollars that they needed initially to implement your pseudo. Investors LoopX, have teamed up and are planning to file a lawsuit against the scammers. It is worth noting that some reputable players in the cryptocurrency space noted
alarming signs that the ICO may be fraudulent before the startup disappeared. You should always pay attention to these comments before investing.
The disappearance LoopX occurred shortly after startup Prodeum also disappeared from the cryptocurrency arena. Team Prodeum wanted to «revolutionize the agricultural sector», placing it in the blockchain fruit. The company Prodeum disappeared as quickly as it appeared – in the middle of January the project team has suddenly deleted his Twitter account and replaced the contents of your site in one word — «penis». At this point in the framework of the ICO has been collected only 11 ETH.
Despite the fact that investors have lost quite a bit of funds, this fraud has caused concern in the community, since the company website was very well done and inspire confidence, and the project team demonstrated excellent skills of marketing and sales. If the scammers have not stopped the ICO in the beginning, you may have stolen more than one million dollars.
Another fraudulent ICO, deprived investors of $ 375,000, was held in October last year. The startup team, Confido promised to create a new decentralized bestoverture payment solution for e-Commerce. Startup suddenly stopped ICO, deleted my website and social media accounts hiding the stolen funds. No, not heard.
According to TokenLot, Confido fulfilled all the requirements necessary for listing your token on the site. After the loss of means this platform, calling itself the «Supermarket ICO» started the investigation «fraud» to hunt down cheaters, but has not yet achieved success.
How to avoid becoming a victim ICO Scam
Despite the growing number of scammers are some simple tips to avoid losing money when investing in new projects.
1. Study the profiles of the team members of a startup on LinkedIn
In the case described above with startup Confido profiles of four key members of the project team (President, technical Director and developers) on LinkedIn was brand new and had almost no ties. It was supposed to engender doubt among investors of the project, but this did not happen. Makes sense to carefully study the profiles on LinkedIn of key project participants and to conduct research on open sources, to check their previous experience.
2. Check statements
Read between the lines when it comes to the statements of the representatives of the project. If we again turn to the case of Confido scammers boasted a collaboration with ChainLink, complex decentralized service implementing smart contracts. However, it was a lie. Therefore, before investing in ICO, check to see whether the statement of the representatives of the project unfounded.
3. Invest only in existing product
Stay away from ICO, which is at least minimally working version of the product. We’re talking about a viable service that needs to have a map of technological development and to be at a certain stage of development. Do not invest in companies that simply offer unsubstantiated token ERC-20.
4. Be wary of small projects
Low threshold of raising funds for the ICO doesn’t mean it’s not a Scam. On the contrary, it may indicate the desire of criminals to exude confidence and attract more investors in a short period of time. Often in this case, the scammers are trying to manipulate investors to mention the high price potential of the token.
5. Do not believe false promises
If a new startup came out of nowhere, and his team focuses on his revolutionary and promises significant ROI in the shortest possible time, you should more carefully examine the project before you invest in it. Scammers know how to throw dust in the eyes and manipulate with the thirst for a quick profit, which tend most investors.
Use caution when participating in ICO projects, do not take all allegations of startups on faith, explore the company’s work and trust your intuition.