How to Identify Fraudulent ICOs - Ten Tell Tale Signs To Put On Your Checklist

How to Organise a Scam

Before we go into our list for identifying potentially fraudulent ICOs, here is a quick three-step guide on how to organise your very own ICO scam:

1. Write up a half-credible sounding white-paper.


2. Create an Ethereum wallet.


3. Publish your white-paper and Ethereum wallet address on a fairly polished website with some pictures of some boys and girls in smart attire and sprinkle in some Blockchain jargon.

It's as easy as that.

Now, here's the thing - this also happens to be how many legitimate ICOs out there go about soliciting funds for their business model. So the question becomes: How exactly can I tell a swindle from legitimate cases?

Some Pointers

Even with the more elaborate ICO scams, there is generally always more than a few giveaways. Below is a list of the basic criteria that we ourselves at ICO Examiner follow. If there is one single item on the list that isn't satisfied, our advice is simply to consider walking away from the ICO as an investment opportunity.

Checklist

1. Is the ICO attached to a legal entity?


2. Does the team have established industry history? Look for LinkedIn profiles with deep history embedded in large networks.


3. Has the ICO attracted interest from established media outlets?


4. Has the ICO attracted interest from established industry players? It is generally a good sign to see such figures incorporated into its advisory board.


5. Does the ICO team make itself readily accessible for sustained questions? Do they provide detailed answers to detailed questions?


6. Has a detailed project road map been outlined?


7. Is there a MVP (Minimum Viable Product) and has it been made available for public consultation and feedback?


8. Does the white-paper contain basic grammar and spelling mistakes? Even a handful littered over a fifty page document should be considered a serious red flag.


9. Does the white-paper contents go over and above generalities and banal market observations? Is there a level of detail in its presentation that indicates a profound engagement in its subject? Prolonged bouts of flaky language generally indicate a suspicious desperation for filler as opposed to allowing an explanation of the business model pursue its own natural length.


10. Does the white-paper contain a detailed explanation of the mechanism(s) which will lend its token genuine functional value?

Many of the above points apply equally to legitimate ICOs. Failure to satisfy one or more of these points simply indicates an inability to pay attention to due diligence - not exactly a source of confidence in the ability of an ICO to follow through with the general complexities of an ICO project execution.

Our list here, by the way, should not be seen as exhaustive. We generally find ourselves focusing on the marketing aspects of an ICO campaign - the lack of a detailed campaign outline is generally a bad sign.

Beware Copycat Sites

There is one also one final test which you may also want to apply. It relates to the domain name associated with the ICO. Naturally, you should always perform a whois on the domain name. You should also check, however, that the ICO has taken care to buy up the same domain names for other, common domain name extensions.

This should be standard procedure for any ICO that is serious about tackling the problems that arise from copycat website imitations that publish fraudulent wallet addresses to siphon off investor funds.

We will bow out here simply by saying that, in this unregulated environment, the risks are as high as the rewards - so never invest more than you are prepared to lose.

We are also keen to hear your own thoughts on the subject as well as your own experiences of ICO fraud.

@icoexaminer