How to spot an ICO Scam - ICO Valuation #1

in #ico4 years ago (edited)

How to spot an ICO Scam - ICO Valuation Part #1


This is the first post of our series of posts about ICO Valuation. Today I will share some tips that helped me to keep my money out of holes this far.

When I'm in the process of deciding whether or not to invest in a given ICO, the first task in my agenda is finding out whether it is a shameless scam. I do that before anything else for the sole reason that it is the fastest way to give up early on an ICO opportunity, thus preventing me from wasting further time on a given initiative. With the current number of ICOs out there, saving time is as profitable as investing.

Good news is, usually the scammers are looking to scam very naive and unprepared investors. Sometimes their targets are not even unprepared, some people around just won so much money on ICOs that they will bet on any new ICOs without thoroughly analyzing it. If, like me, you cannot afford to be like that, hop on !


If the ICO is, by any means, anonymous or do not gladly advertise their team, it is an absolute NO GO for me. The one thing people have to loose when scamming other people through ICOs is their reputation. One can argue that they can loose time, but so many companies make it so easy to issue anything nowadays that it isn't a factor anymore. So if they do not stake their own identities in the project I don't advise you to count on them to take it seriously.

Some people have sound arguments about reasons that can lead teams to hide their identity. For example, megadouble said, in bitcointalk :

[...] there are clear issues with posting your true identity online. It could be for tax reasons and for privacy so this is not a measure of an dodgy ICO . Do you research in what is being offered, it makes no difference if the dev is called Yolobeast of John Smith. (sic)

Well, in my experience that is only true a small portion of times. So unless I really buy the idea, for some strong and specific reason, I wouldn't advise taking this kind of risk.

LinkedIn Profiles

It's becoming part of the ICO culture to post LinkedIn links along with the team's profiles. That's a good sign because shows us they're not afraid to be contacted. In the past, scams posted real people's profiles claiming they belonged to their ICO team when actually the person had no clue it as even going on. That's why it is worth to at least check their profiles and make sure they mention the company that is launching the ICO. Otherwise it is an absolute red flag.

None of these tules are absolute truths. For example the Monaco Card team generated a lot of polemic because they didn't have the Monaco brand on their profiles, but it turned out they had bureaucratic reasons for that and were yet changing the original company's name to Monaco. Yet, as a general rule, teams should advertise their part in projects that seek to be crowdfunded.

Company Registration

Many countries have public records of registered companies, Switzerland is an example. You would expect that a company that is trying to get you to fund them, would have taken care of such formalities. Otherwise it makes me think they just rushed into the ICO world to get a piece of the pie for themselves, without being fully prepared to make their business thrive.

Domain Registration

Some people do not know that, but web domains are publicly registered, and whoever registers it has to fill in a lot of information, for instance:

  • Name (person or company)
  • Address
  • Phone

One way to find that info is using WhoIs service.

Sometimes, these info can get you a good feeling of how real a website is. Usually, you'd want them to register the domain in the company's name, and find the address to the company's headquarters. You can always check the outside of their headquarters using Google Street View. Although these days it is not unusual, specially among tech companies, to work remotely or spread across a few countries. Still, if they claim to have a running business or something of the sort you'd expect some headquarters.

Escrow accounts

Some projects hold funds in escrow accounts until their minimum cap is reached. This is becoming a common practice to show goodwill, so that when it is not present I usually get suspicious.


It is quite normal for coins to need to be premined. Currently, up to 10% of premining is considered fair. Levels higher than that tend to bother the community. I've seen ICOs announcing 50% premineration in small letters in their white paper. That is basically leaving half of the market cap for the creators. Seems like a way for them to get rich quickly.

Open-source code

Sometimes the company makes an ICO but it is not at all open-source. Sometimes it makes sense, sometimes it doesn't. Having the code in GitHub is always a nice way to show good faith and to get publicly audited by investors.

Even when companies are not open-source, their smart contract code should be, so that everyone can check it is not flawed.

"Essential" Documents

The ICO culture is still building itself. Usually every ICO has an institutional video and a white paper explaining their business model and token value proposal. If those are not present, we're likely dealing with a scammer that won't go though the trouble or a very unprepared team, which didn't even research enough of ICOs before launching their on.

Lack of technical details

I've seen white papers claiming to do great things and focusing the paper on financial projections. That seems like a technique to devise the investors' attention to the profits the company wanna make investors believe they'll make. The company should explain how it'll achieve their results even if it is very technical, so that at least specialists will be able to evaluate it.

Done !

These are some very accessible and easy-to-spot flags I usually look for. I hope it helps all of you to make smarter decisions !

Before finishing off, on an important note, if you like the project you're considering, don't just discard them if you raise any red flags. It is quite common in ICO culture that teams relate very closely to investors. So just drop by their Slack Channel or message them on LinkedIn to get yourself some answers. Some other investor might have asked the same questions already.

Let me know whether you know of any other flags I should include in here and keep an open eye for the following ICO Valuation posts !


Great post! An advice is to add the factor of pre-publishing the Eth adress.
As we saw with Sonm and Coindash, scammers are quick and good at tricking the contributors into sending somey to the wrong adress.
This could have been prevented if the team in a safe way, before ico starts, revealed the correct adress.
I invested in santiments ico and they handled it extremely well. One reason for why it went so smoothly was the honest and active communication the team had with the investors.

Agree with you there. That's one way to go ! the other is using a proprietary platform. Great add-on ! cheers

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I just want to share the coin information and share it.
In addition to the NeverDai ICO information posted today, I would like to ask you for ICO information frequently.

Awesome ! thanks for sharing !!

Pedro, some of us have no idea what ICOs are. Write like you're talking to a 5 year old and you'll draw more fish into the net.

Excellent advice @tidnull . I'll keep it in mind for future posts and also consider writing some articles on what is an ICO after all . Thanks !

I just googled it and I get it now. Just remember, I'm 5. But then again most 5 year olds today probably know how to Google. Terrifying.

hahaha good one

great article about ICO . Specially to those who are just newbie about this " Initial Coin Offering " Researching on your own about the company will let you to decide if the site is really Legit .

Better participate in airdrops:

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