What You Need to Know About Fake Initial Coin Offerings

Cryptocurrency has exploded in popularity in recent years, and now hundreds of millions of people worldwide invest in the likes of Bitcoin and alt coins. However, scamming is also rife in the crypto world, so you have to be very careful about how you invest and which assets you buy. A common scam technique is the fake initial coin offering (ICO).

How Do Fake Initial Coin Offering Scams Work?

An initial coin offering or ICO is when a company offers investors the chance to buy tokens of a new cryptocurrency. The tokens usually come with certain benefits or alleged benefits, like a stake in the new project, some level of influence or governance over how the project proceeds, or access to certain services.

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ICOs can be genuine, but many of scammers use fake initial coin offerings to essentially trick people into investing. They’ll usually use various methods to build hype around their projects, like blog posts posted on many of websites, social media posts, or completely made-up claims about celebrity endorsements or major partnerships.

This is all done to build up “FOMO” or “Fear of Missing Out,” where people feel like they need to invest or they might miss an amazing money-making opportunity. Then, once the scammers have pushed as far as they can, they “pull the rug,” so to speak and cash out, taking investors’ money and vanishing into thin air, failing to provide any of the promised returns on investment.

Signs of Fake Initial Coin Offerings

Sign 1. Claims That Are Too Good to Be True

The way that many fake ICOs work is based on FOMO, as discussed above. To generate that FOMO and hype around the ICO, the scammers will make bold and often unrealistic claims. They might say that their project is set to become “the next Bitcoin” for example or is projected to gain gigantic amounts of value in the next weeks or months.

Sign 2. Promises of Guaranteed Profits

There are no guarantees in crypto. Even the biggest projects and cryptocurrencies can rise or fall in value depending on changing market and sociopolitical conditions. So, if you encounter a project that is literally promising or guaranteeing that you’ll make money, you should be wary. Fake ICO scammers often make these kinds of claims to entice investors into handing over their cash.

Sign 3. No Transparency in Terms of a Whitepaper, FAQ, etc.

Oftentimes, these kinds of crypto scams are rushed out so that the scammers can try to make as much money as possible, as quickly as they can. They don’t bother to craft extensive whitepapers, answer common questions, or even make good quality websites. So, if you see a project that has a vague or non-existent whitepaper, no real FAQ, or a site and digital presence that seems like it was hastily scrambled together without any professionalism, be very cautious.

Sign 4. Lots of Generic Articles or Posts About the Project

As with various other crypto scams, fake ICO scams often involve the use of false marketing to spread the word and raise interest in the ICO. Scammers will create blogs and social media posts, for example, or even use bots to spread the word about their coins, often encompassing a bunch of lofty promises and crazy claims to make their projects sound like amazing investments.

How to Protect Yourself From Fake Initial Coin Offerings

Do your research before you invest in any type of crypto or digital asset.
Consult whitepapers and other resources thoroughly.
Don’t be fooled by FOMO hype and fake marketing claims.
Be very wary of any project that promises guaranteed profits or unrealistic price rises.
Check that any projects you invest in are registered with the Securities and Exchange Commission (SEC).