Market Report

5 steps to find out if an ICO is a scam coin




Last modified


devil bitcoin aims to scam crypto heroes

Even though Bitcoin has firmly established itself as the main cryptocurrency on the market, new cryptocurrencies keep emerging regularly. Most of them are financed through crowdfunding, and most specifically ICOs (initial coin offerings). However, according to a study by the Satis Group, the entire crypto landscape is a dangerous one with scam coins making up a whopping 80% of ICOs out there.

That is why it is incredibly important to know how to tell whether the coin you are about to invest in is actually a scam or a legitimate ICO project. What should you look out for? Which features should you pay attention to?

Well, let’s find out.

Goals and Whitepaper

Obviously, one of the most important steps any investor should consider before making a financial investment is conducting some due diligence. It is an essential step prior to investing in an ICO or any other project. Any project needs a good outline – and this is where the whitepaper comes in handy.

The whitepaper is basically the general description of the project’s background, and it is the first thing that is presented to prospective investors. So, it is extremely important that the concept is precise, clear and plausible. Basically, the whitepaper is supposed to explain the whole rationale behind the project. The following are the points that you have to pay a special attention to:

  • Unrealistic, too grandiose goals. If the guaranteed profits seem to be really big and tempting, this is an important warning sign. The reason behind it is quite simple: big revenues are always connected to big risks, and thus can’t be guaranteed with ease.
  • Too much fluff: Usually, the whitepaper is meant to get straight to the point and describe the project in a clear and simple way. If this is not the case, the reader gets distracted, and the problematic details can easily be hidden. Pay attention to the level of plagiarism as well. Not more than 1% of the white paper should be plagiarized.
  • Too many buzzwords in the whitepaper’s text. When you don’t understand the text you are reading, you don’t understand the project itself. Furthermore, if buzzwords are excessively placed in important sentences, it makes the novice reader feel as if what is written is professional and trustworthy. Yet, the text only sounds technically advanced with big buzzwords, which is meant to prevent the reader from grasping the true details.

credit card scams and phishing symbol image crypto heroes


With cryptocurrencies – even with Bitcoin, the technical part of the project is undoubtedly at its core and as such, all the financial decisions should only be made after fully understanding the technicalities.

  • Check whether the Escrow (service that holds the coins until what they are transferred for is provided) is compromised. Usually, Escrow services have multi-signature wallets where the agreement of several key-holders is needed to complete a transaction. That is why it is important to keep an eye out for the Escrow participants and the escrow conditions – e.g. knowing who are the key-holders and how they associate with the ICO. This may save you from losing some money in case you end up investing in a scam. You will also want to check the type of escrow being used. It is good when the funds’ release conditions correspond to the stages of the project, e.g. 20% on tokens distribution, 60% on the beta release, and so on.
  • Every ICO facilitates their crowdfunding through tokens or cryptocurrency sales. This system should be easy to view and understand. Scam ICOs sometimes hide the progress of their token sale to create a sense of false urgency.

Website and Social Media

Let’s say, you have heard about a new promising startup from a friend. Where do you go first upon searching for the said startup? That’s right – you open their website. Common sense should generally tell you if the website looks like it could have a scam coin behind it. But let’s face it, scammers often find new tricks that capture the investor’s attention. Here are some tips to use while researching an ICO’s website and social media:

  • It is suspicious if the ICO is promoted by models or highly prominent people. Of course, celebrities sometimes endorse anything, but if you see it with ICOs, you have to pay close attention. In the most outrageous of known scam coin campaigns, the promotion was led through fake celebrity accounts – and some even claimed their project was supported by high-level politicians, such as Putin for example – which is really far from reality.
  • The website looks extremely professional. Although counterintuitive from the first sight, sometimes the facade is polished so brightly that it is blinding and distracting from the allegorical cracks in the walls. Basically, when the website is all about the facade with less detailed information on what the ICO is essentially about, you might be dealing with a scam coin.
  • The pictures and other visual materials look fake or resemble those of other (even unrelated) companies.

The Team

If you want to know if the project is a fake, you have to check whether it’s run by scammers. Check the profile of the team and do some research on the people you find. Notice the following:

  • Some scam coins try to lure you by impressing you with the appearance of the team behind the project. However, you would probably be right to expect an average cryptocurrency expert to look like anything but a “Victoria’s Secret” angel.
  • The entire ICO company is run by just one person. Usually, when there is only one person playing different roles, it is a clear sign that the company is lacking – a single individual can’t be a jack of all trades. Plus, there is no easy way to guarantee a project run by one person.
  • No information on the team can be found. When there is zero information on the team members and their interactions and involvements in the world of cryptocurrencies, you can consider that as a red flag. Most scam coins have team members with information that only revolves around their participation in the project.

caution tape drawing crypto heroes

Sum-up: Proceed with Caution

A joint report by PwC and the Swiss Crypto Valley Association shows that more than €11.7 billion has so far been raised by ICOs between January and May 2018. This value is twice as much as the amount raised though ICOs in the whole of 2017. On one hand, these numbers show tremendous opportunity, but on the other hand, one can see just how big of a financial risk there is if a percentage of the ICOs turn out to be scams.

Keep in mind that even the successful cryptocurrencies are often criticized for being financed by speculative investing. What you need to know is that the very nature of ICOs is such that it draws investors in by promising big returns. From beginners to experienced investors, the temptation to get into risky investments can be overwhelming. To sum it all up, here is what you should remember:

  • Common sense and a cool head are your best tools in separating the wheat from the chaff.
  • Assess any new project critically and ask yourself if it sounds too good to be true.
  • Take time to go through the details of the whitepaper and project information. If you notice any inconsistencies or missing pieces, there is a good chance the project could be a scam.
  • Be sure to consult outside sources about the legitimacy of the project, i.e. inquire about the possibility that this ICO is a scam. Ask questions to obtain clarity.

Finally, remember that although there are many scam coins out there, there are still good and legitimate ICOs that deserve your attention. Therefore, although you ought to be cautious throughout your crypto journey, stay alert for ICOs that are worthy of investment.