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How to Identify Fake ICOs?
Initial Coin Offerings, popularly known as ICOs (of which
there are many), are
among the most popular forms of fundraising in the recent times. Over the years, a number of companies have resorted to ICO fundraisers instead of the typical Venture Capital approach or the IPO approach. ICOs have a number of benefits over traditional methods - as they allow practically anyone to invest! Some ICOs
offer very lucrative returns. However, there are a number of fake ICOs - and one needs to watch out for them.
One of the biggest problems that most governments around the world have with cryptocurrencies is that of ICO-related issues. These issues are largely pertaining to the fact that many ICOs are created solely for the fact that some companies want to scam people and create everything from a website to whitepapers to all the promotional material only so that they can run away with
the money of the investors.
However, smart investors can easily identify and avoid these Fake ICOs. Let us
take a look at some pointers which should clearly raise a ‘red flag’, hinting
that the ICO you are looking at is probably fake!
Identifying Fake ICOs with these Red Flags:
Fake Addresses and Suspicious Social Media Handles
One of the biggest red flags is that a fake ICO is almost always likely to have
a fake address as their ‘registered office’. You can try calling up the number
that they have shown, or if you are in the locality, head over to their office
to check them out. If the phones aren’t answered and the office doesn’t exist -
it is an immediate red flag.
Moreover, social media profiles of the founders too, plays a major role. Look
them up if they are actually who they claim to be. Many times, some scammers
even use stock images as their founders/directors images. This needs to be
checked before making any further investments. Moreover, these websites, almost
always, are built in a very shabby manner - either looking like they’re straight
out of 1998, or that they’ve been built in a hurry over the past week.
Too Many Promoters
The kind of promotions that the ICO is running tells you a lot about them. A
real ICO would promote itself too, but would focus much more on making offline
connections and going to press meets and pitches etc. However, a fake ICO would
heavily rely on online publicity and by hiring a lot of ‘social media
influencers’, who are basically paid to promote the ICOs.
Such tactics were used by Bitconnect - which primarily relied on its social
media promoters. Promoters tend to make over the top promises and often
hard-sell to paint a rosy picture! Be on the lookout for fraud ICOs which use
too many promoters to market their token sale!
Another major red flag which alerts you about fake ICOs is that they promise
guaranteed returns on your investment. This multi-level marketing model sort of
a setup should be an immediate red flag. Many pyramid schemes are masking
themselves behind an ICO - and users must be on the lookout for that. Going
through a currency’s whitepaper is one of the best ways to understand what their
offering is and then make an informed decision.
What To Do For Additional Protection?
Sometimes, some really cleverly made ICO fraud ads can bypass these red flags
and present themselves to be genuine. ICO review websites such as ICOtokennews
help identify genuine and legitimate ICOs which are coming up. The website
studies all upcoming ICOs in detail and after a great deal of research - reviews
only the legitimate ones.