How To Identify ICO Scams – Free Guide For Blockchain Investors

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How to Combat Scams in ICO Investing

How to combat scams that plague ICO investing using a global network of security experts.

From the CMC editorial desk: We asked this all-important question to Sentinel Protocol, a company setting out to solve just this problem. With their expertise in security, what does their solution look like? Here we go!

While the pace of ICO fundraising may have slowed down recently, ICOs are still a hot topic in the realm of cryptocurrency investments. The size of the average funding round and the rate of project funding are higher than ever in 2020.

ICOs are often synonymous to risk and hype. When they take place, the project is usually only at an early stage, trying to justify the greatness of its team and advisors, tokenomics, or even the need to use blockchain technology in the first place. From an investment perspective, it may be difficult to identify great projects from the good, and good ones from the bad. The bad ones might be called “scams” by those who were burnt by subpar returns. The scams we’re discussing in this post, however, is of a different type – it is about checking the validity of information exchanged between an investor and the ICO project.

Two main reasons why individuals are easy scam targets

In the centralized world, there are institutions to provide security against fraud and they can also report fraudulent activity to the police. In the decentralized world, this responsibility is imposed onto individuals, forcing them to protect themselves from scams and hacks. In the real world, you can call the credit card company to block your card if it gets stolen. But in the crypto world, your stolen crypto is out in the open.

The problem is that crypto individuals are not accustomed to checking whether transaction data is authentic or malicious. Secure online behavior needs to be acquired over time, as it is a behavior that is learnt through specific education or repetitive practices. The practices of checking if the website is not a phishing site, or if the wallet address is not compromised, are often overlooked by those who have never been victimized before.

Another problem is that crypto individuals are not capable of doing a proper security check, simply because they are not experienced in it. If it is a really well-crafted scam, carefully designed by malicious actors, crypto individuals by far lack the capability to detect such scams on their own. For example, tips have been shared among the community to check the SSL certificate on each website. But if the tips involve checking any code or detecting spoofed emails, not everyone has the capability or awareness to do such deeper security checks on their own.

ICO projects are no exceptions to falling for scams

Although not widely publicized, ICO projects are also major targets for scammers. When we held our own ICO for Sentinel Protocol, we witnessed many scam attempts towards us too. It’s not just careless ICO participants contributing to the wrong wallet address, visiting a phishing site, or falling for the Twitter giveaway scams.

Personal messages from advisors on Telegram, and emails from ICO review and listing sites are part of the ICO lifecycle. Due to this, Telegram handles and email from similar domains could be easy to impersonate. Some syndicates try to sabotage sales or forge KYC submissions. Being a security company ourselves, with in-house security experts who do digital forensics and threat research full-time, we managed to block these attempts successfully. But imagine how an ICO project without the same experience in security would fare, being without the resources to hire full-time experts who can distinguish malicious data from seemingly legitimate information.

On top of ICO projects already receiving constant queries from investors about scams by impersonators pretending to be the official ICO project, the team members themselves need to be extra careful about scam attempts targeting the team. Indeed, quite often, conventional security breaches usually occur on the inside. Crypto companies, the ICO projects, are also not immune to this.

A simple solution with a difficult implementation

Due to the nature of these threats, a solution would require an approach that incorporates contributions from different parties with their own unique skills and perspectives. This multifaceted solution, however, should not confuse individual users by its high-level sophistication.

This makes it a multi-faceted problem, mainly: (1) It has to be a feasible and direct solution to the scam problems most often detected; (2) It requires actual knowledge of these problems and how to solve them; (3) The user experience must be seamless and easy to adopt even by those new to ICOs.

Making a comprehensive threat database accessible

Since scam and fraudulent attempts are ever-growing and malicious data appears in bits and pieces everywhere around the world, it would not be a complete arsenal of comprehensive threat data if we did not use collective intelligence. As a team of cybersecurity experts with industry knowledge, we understood that using this collective intelligence to build a decentralized threat database is otherwise not possible without blockchain technology.

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These considerations formed the backbone of this Threat Reputation Database (TRDB), developed to collect as much data on scams and fraudulent activities as possible. The system relies on a network of security experts called “The Sentinels” who are globally distributed and incentivized to leverage their security expertise within the token economy.

Of course, we still need the expertise and pre-existing knowledge to kickstart the process of populating the database. By roping in the “Pre-Sentinels”, who have been interviewed and whose security expertise has been verified, we bootstrap the first repository of threats upon which others in the token economy can build. Collectively, they are building a whitelist for authentic ICO data and a blacklist for malicious ICO data to display what legitimate information ICO participants can safely access.

As we also mentioned, to ensure individuals are able to distinguish scams without high overhead, an easy-to-use solution is paramount for it to become the gold standard in dealing with crypto scams out there today. For this reason, a Chrome Extension was chosen as the first iteration of the product. By tapping into this extension, the chances of sending a contribution to the wrong address is reduced, simply by double-checking whether the site being visited is authentic or whether the wallet address is the correct one.

Reducing security threats around the world

For most, it already takes a lot of research to find great ICO projects to invest in, so it is important to ensure that the resources put into it are legitimately used with little risk of being scammed in the process. A security solution like the TRDB ensures that the know-how of the crowd is being applied to aid the larger public in accessing authentic data and platforms.

As our blockchain applications become more advanced, the threats will also become more sophisticated. We believe that solutions should be more user friendly so that more people can benefit from them. Cybersecurity is becoming increasingly prevalent in today’s world as cyber-terrorism grows. To combat cyber attacks, we have to work together to ensure that we protect each other from these malicious actors.

Sentinel Protocol is the first crowdsourced threat intelligence platform built on the blockchain. It collects and analyzes information about real-time hacks, scams and fraud to improve security of crypto assets and shares this intelligence with crypto exchanges, wallets and payment services using a decentralized Threat Reputation Database (TRDB).

What is an ICO?

If you are interested in learning ‘’what is ICO’’ and looking for “what is ICO guide,” you came to the right place. This article will help you to understand what is ICO, how does it work, its risks, and benefits.

What Is an ICO

ICO stands for Initial Coin Offering. It is a new way to raise capital for all sorts of blockchain-related projects by selling cryptocurrency. New projects use it to sell freshly minted crypto tokens in exchange for Bitcoin, Ether, other cryptocurrencies, and, at times, fiat. In a way, it resembles Initial Public Offerings (IPO), except that ICO’s are mostly unregulated and grant little to none rights to investors.

So why would anyone buy or launch an ICO? There are several ways how ICO’s can be beneficial for their stakeholders.

ICO Benefits

The investors can enjoy the following benefits:

  • An opportunity to obtain new cryptocurrency for a low cost in hopes to get good returns on their investment (sort of like buying Bitcoin in 2020).
  • ICO coins may come with additional benefits, like revenue redistribution or privileged access to projects products and services.
  • Ability to support projects and teams you like.

Meanwhile, token issuers get:

  • Quick access to seed funding with fewer regulatory restrictions.
  • Funds without any loss of equity unless stated otherwise.
  • Opportunity to create and experiment with innovative decentralized business models.
  • An initial user-base which is eager to test the service.

ICO Risks

Needless to say, ICO’s come with a fair share of risks, too. For example, token buyers have to face:

  • Relatively inexperienced team with no guarantee that the project will fulfill its promises.
  • No regulatory protection and guarantee of returns.
  • Limited transparency on project development and progress.
  • The risk of the project being an elaborate scam or pump and dump scheme.

At the site time, ICO initiators take a risk due to:

  • Uncertain regulations that may result in fines or sentences.
  • An unstable investment which comes from the volatility of cryptocurrencies.
  • Little to none information about the token holders.

At the end of the article, you can find a list of symptoms that may indicate the ICO project is a scam. Now, let’s take a quick look at how ICOs came to be.

A Brief History of ICOs

ICO history began in 2020 when the first one was held by Mastercoin, a digital currency and communications protocol. It raised approx. $5 million. Soon it was followed by the Ethereum ICO, which managed to raise around $18 million at the time.

Since 2020, the ICO market was steadily growing but didn’t see an explosion until 2020. It saw 875 ICOs in 2020 alone, almost 30 times more than in 2020. They helped raise over $6.2 billion, compared with $96 million in 2020. Still, the record year for ICO’s was 2020 with more than 1200 ICOs which resulted in $7.85 billion raised.

The largest ICO to date is that of EOS, a decentralized application network, which raised over $4 billions in several rounds during 2020 and 2020. Since the ICO explosion in 2020 and 2020, the interest in ICO’s began to wane.

ICO launch statistics. Source:

How does ICO work?

A project or a company specifies its intentions to hold an ICO by publishing a so-called whitepaper. It explains the project, its goals, how much capital it needs to raise when the ICO is scheduled, and other information to help investors decide whether to participate.

In exchange for making an investment, an investor gets the project’s cryptocurrency, usually referred to as a token. Depending on the project, tokens may be acquired in exchange for other cryptocurrencies or fiat money like US dollars, euros, and so on.

Most of the ICO tokens are issued on dapp platforms. As of 2020 February, the most popular token issuance platform is Ethereum.

ICO token issuance platforms ranked by popularity. Source:

ICOs let startups and other companies raise capital much more easily than, for example, by selling shares or bonds or getting loans. The market is still largely unregulated, and they don’t need to deal with venture capitalists or banks. Going forward, however, raising capital via an ICO can be expected to become more and more complicated as the market matures and new regulations are introduced.

The answer is maybe. There is no clear regulatory framework regarding ICO’s yet, so it is an utterly gray area. In the future it is likely to be regulated; therefore, most ICO’s are required to comply with KYC/AML rules. As of now, it’s too difficult to impose any limits, since most officers are hesitant to put restrictions on a potentially world-changing technology.

United States Securities and Exchanges Commission (SEC) treats ICO’s differently. If the token being sold is merely a utility token, it does not classify as financial security. However, if the token has qualities of an equity coin with a sole purpose to appreciate in value and benefit its investors, then it can be treated as security and must comply with the legal processes.

At the end of the day, until a regulatory framework is imposed, most people will continue to use ICO’s as a tool for fundraising.

How to Identify a Scam ICO

An exit scam ICOs are quite popular so the ability to identify them can save you much money.
According to Ernst & Young, almost 10% of all funds raised by ICO’s end up in the scammers’ wallets.

However, there are ways to identify fraudulent ICO. Look for these common signals:

  • Anonymous team. Many scams do not publicize their team, so no one can verify who is related to the project. It is a major red flag.
  • An offer seems to too good to be true. If the project offers you ludicrous returns or impossible products, that’s a major red flag.
  • No roadmap. A serious startup always plans ahead and is open about its further steps. If the future of the project is concealed, it’s probably non-existent.
  • thread. A legit way to launch an ICO is by announcing it on It is the largest forum for Bitcoin and cryptocurrencies, and legitimate projects will gladly participate in the discussions and answer all the questions.
  • Code. Credible projects will commit their code to Github where everyone can review it. No code, no project.
  • Is the token or blockchain necessary? Many projects can function well without a distributed ledger. Many projects try to take advantage of ICO’s just to collect extra money. So ask yourself, does it really need its own coin?
  • PR and media activity. Trustworthy projects hire qualified marketing specialists who manage to create an active, engaged community. Also, it is always a good sign if the project gets positive mentions in quality publications.

Remember not all ICOs are scams, and they also provide a legit way to raise funds for legit and cool projects.

Have any suggestions about this entry? Let us know here.

Cryptocurrency and ICO Scams, How you can Identify

Giovanni Casagrande

Dozens of recent cryptocurrencies launch every month, and alongside these new tokens and cash comes a chain ofinitial coin offerings (ICOs). The appetite among a broad pool of buyers for these opportunities has grown, even notwithstanding the fact that cryptocurrencies had been battered in 2020. All of those elements integrate to lure scammers. After all, if traders have demonstrated that they may be inclined to throw money towards a particularly speculative cryptocurrency, they appear to be similarly probably to spend money on fraudulent tokens or ICOs.

For the cryptocurrency investor looking to make the maximum of the host of new investment opportunities at the same time as final safe from fraudulent ICOs and sketchy coins and tokens, the prospect may be daunting. Blockchain and cryptocurrency generation is developing at a fast pace, or even skilled investors might also locate it hard to hold up with the terminology. While there’s no guarantee that any cryptocurrency or blockchain-related startup may be valid or a success, the stairs outlined underneath permit you to to be as certain as viable that you’re no longer falling for a scam.

Know the Team

Perhaps the single maximum important success thing for any ICO or cryptocurrency is the builders and administrative group behind the project. The cryptocurrency area is ruled by way of important names, with celebrity builders like Ethereum founder Vitalik Buterin capable of making or breaking new tasks in reality through having their names indexed on a improvement group. For that reason, it’s more and more commonplace for scammers to invent faux founders and biographies for his or her initiatives.

The satisfactory protection towards this fraudulent tactic is to very well research the individual team individuals of a project earlier than you invest. It’s a bad signal, for example, in case you’re unable to find any facts approximately a specific developer, founder on LinkedIn or other social media outlets. Even if profiles do exist, check to look if their activity seems to match up with the variety of followers and likes they accrue. Individuals who hardly ever interact with their followers and but have lots of enthusiasts won’t be real.

Beyond figuring out whether or not the development crew is real, it is essential to make an effort to see if their qualifications measure up. Do the founders have the revel in they declare to have? Is it relevant to the present day project at hand?


A cryptocurrency or ICO whitepaper is the foundational record for that assignment. The whitepaper must lay out the background, goals, approach, concerns, and timeline for implementation for any blockchain-associated challenge. Whitepapers can be rather revealing: businesses which have a flashy internet site may additionally display they lack a basically sound idea. On the alternative hand, a enterprise with a website containing spelling errors can also have a whitepaper that suggests a rock-solid concept and a cautiously conceived implementation plan.

The first step in the direction of analyzing a whitepaper is to study it very very well. Check to look if the whitepaper has complementary assets as properly, consisting of financial models, prison worries, SWOT evaluation, and a roadmap for implementation.

Companies that don’t provide whitepapers must be averted at all costs. Still, it is viable for a fraudulent company to position ahead a powerful whitepaper, as became the case with PlexCoin; this enterprise controlled to raiseover $15 million earlier than the USASecurities and Exchange Commission (SEC) stepped in to shut it down. A whitepaper must answer all the questions a capability investor might have approximately what sets this precise venture apart from its competition, the way it goals to achieve success, and the measures it’s going to take to attain its goals.

Look to the Token Sale

Any ICO will depend upon a token or foreign money system a good way to facilitate the crowdfunding procedure. Legitimate companies and endeavors make the device itself and the progress of the token sale easy for capability buyers to view. Look for the token sale figures because the ICO is ongoing. Better but, watch the token sale through the years to see how it’s far progressing.

If a company makes it hard for absolutely everyone to chart the development of its ICO, this is a major pink flag. Some rip-off ICOs will disguise their token sale development underneath the pretense of individual contribution addresses; this prevents potential buyers from seeing precisely how a whole lot has been raised and what kind of time remains within the sale. In a few instances, this might be an attempt to generate a sense of urgency among capability investors, even if there isn’t always proof of a successful sale happening on the identical time.

How Feasible is the Project?

While it may appear apparent, ICOs and cryptocurrencies with the finest possibilities for achievement are people who have the essential shape to live longer than their competition. Many launches, even notably-publicized ones, have sputtered after initial hobby diminished. Your best hazard of a a hit investment is based on a corporation having an conceivable, viable set of pursuits. The corporation should have a compelling concept in the meanwhile, but it additionally should be able to carry that idea over into execution over the quick and long terms alike.

Going in conjunction with the query of feasibility is the problem of transparency. Companies which have top notch ideas and models are much more likely than others to want to be as obvious as feasible with the wider network. Look for agencies that goal to preserve capability investors updated with normal, exact development reviews on a enterprise website or on social media. It’s additionally useful to look if a organization has a timeline for what has taken place in the development method as properly.

Exercise Caution

Even the maximum successful ICOs and cryptocurrencies are slammed for being fueled by speculative making an investment. The concept of having wealthy short on an funding in a hot new task is tempting enough to attract seasoned buyers and novices into risky areas. Keep a watch closer to caution as you look for new funding possibilities inside the ICO and cryptocurrency areas. Be aware that projects sounding too correct to be genuine possibly are. Spend time scrutinizing each detail, and assume that the absence of a bit of important statistics can be an try to disguise an unsound version or idea.

Look for outdoor assets to verify the legitimacy of any mission earlier than making an investment, and continually ask questions which you cannot already find the solutions to. The cryptocurrency and ICO spaces provide incredible possibility for investors who’ve accomplished their homework and are able to make sound funding choices. They additionally function pitfalls that can lead to big quantities of cash being misplaced due to scams, frauds or even valid agencies that are definitely poorly designed and not likely to succeed.

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