Be very careful with ICOs – how to check it’s not scam

Is your inbox getting many ICO offers? Or have you started seeing YouTube ads for cool new ICO’s promising great returns? It’s a great new age of blockchain and emerging possibilities with it – but also great opportunity for scammers to get money out of wannabe investors. Read this to make sure you won’t be a victim of a scammy ICO.

There’s over 1300 tokens out there, most of them came in the last few months in the form of an ICO – initial coin offering. This is similar to an IPO – initial public offering, when a private company (like Facebook before May 2012) goes public. This means that their financials are now publicly available and you can buy their stocks.

In case of an ICO, you can not buy their stock, but you can buy their tokens (coins), which are usually using the Ethereum platform. They are usually layered into some kind of pre-ICO bonus scheme. Sometimes legit, mostly not so.

Why should you be very careful with ICO’s?

  • there’s so many ICOs in just a few months – do you think that suddenly there’s so many skilled blockchain programmers and entrepreneurs just spilling out projects within a few months?
  • there’s too much time pressure – the more aggressive the ICO is (invest NOW or you’ll miss on bonus 50%, invest tomorrow and you get 30% etc), the more likely it’s a “blockchain Ponzi scheme” – a Ponzi scheme using the latest technology jargon to pull you in.
  • they are mostly unregulated – you basically are giving your money to a website and some faces on it. They may be good at webdesign, InDesign for the pretty white papers (or just paying someone for it), but they might not have any of the fancy advanced things they are describing on the website. No government or laws are watching your back – if they disappear with your money, they are gone. Happy times for them.
  • it’s very easy to join – the bar is very low – everyone can join, regardless of their experience or knowledge of what they are investing into. All you need is to be able to buy BTC or ETH and send it to them. The less the investors know and the more profit thirsty they are, the better for the scammer. With recent FOMO, it’s never been better to scam people. Think of it as an upgraded version of some kind of 90s investment scheme, where many people saw their money vanish.

How to check an ICO – find out whether it’s legit or scam?

The bad news is that there’s no one solid source that can tell you for sure. The good news is that you can find bits and pieces of information on various forums that will help you make your mind up.

I wanted to write this post after I was shown an advert for Terraminer ICO on YouTube. Looked interesting, so I checked their website. That didn’t look too bad on the first impression. But once I started reading into the details, I started hearing alarm bells. Here’s my process that I hope will also help you stay away from scammy ICOs:

  • WARNING sign #1 – they promise specific and quite big returns. Why is this bad? If you’re a startup, you promise great technology, great potential, great team and hard work. These are the things you can control. You can’t control how will the market respond to your product, therefore you don’t promise anyone a profit table with potential returns.
  • WARNING sign #2 – time pressure – as mentioned above, the more they make it out that TODAY is the day you should invest, the more likely it’s a scam. It’s a typical tactic – do it now! Can’t give you time to think because after you thought about what they offer, you might realize it doesn’t make sense and it’s a scam. But think about it – a good ICO will give you enough time by announcing their sale early and leave enough time for people to research and maybe invest. They don’t have a burning deadline tomorrow or in a month. If they do, they are really shit at planning. And if they are, would you really want such people manage your money?

  • WARNING sign #3 – contradictions – you might not find them yourself, but use the crowd – google it :). Seriously, Google is your best friend when it comes to investing today. Just google “terraminer is it scam” and read through the forums. Very often, there’s great analysis done by other people like you or me. Like this one (use google translator): There’s many valid points raised about their website, from the author and other sources he found, the fact that they are creating a cutting-edge mining farm in China – not that well-known for open entrepreneurship and freedom + potentially clamping down on cryptocurrencies. Of course – you don’t know the person raising these points, so verify them or believe them, or believe the ICO founders – it’s up to you. But this way you at least hear many other opinions, not just the ICO site trying to sell you something.
  • WARNING sign #4 – strangers in the team – this might be a false positive, as there are great ICO’s that were put together by previously unknown people. Think about Bitstamp – although not an ICO, but did you know it’s founders before this year? Or even now? Probably not, but they are doing well for us :). As for ICOs – the more obscure and strange the team feels (weird photos, no LinkedIn links or other social networks), the less you should trust the ICO.
  • WARNING sign #5 – the white paper is just a copy of the website. The point of a white paper is to go into detail of their technology, financials and business plan. If it’s short and just says what the website says in a different format, it’s probably not worth spending any money on.
  • WARNING sign #6 – do they have a lot of advertising but there’s not much talk about them in the crypto-forums? A sign they are all talk but no action.

You should always do this with a new ICO you are considering:

  • google their name – read forums on reddit or elsewhere – get a feel for it. Might be very positive, might be mixed or pure negative.
  • google their team members – who are they? Do they have a history that’s related to the project? Do they even have a history?
  • do you feel pressured into investing ASAP? Why is that (because of a too tight ICO deadline, or because you arrived late?)
  • do the profits sound too good to be true?
  • check their domain on – is it registered to the same company, country? (hint: terraminer isn’t). When was it registered (hint: terraminer was registered 30.9.2017 – fairly recent for such a business).
  • as yourself – is an ICO needed for this business? If they themselves are making such profits, why an ICO?
  • and finally ask yourself – are there better alternatives to this one? Maybe similar ICOs (solving the same or similar problem), but with a better team and less questionmarks? What will I lose if I pass on this one? Is it worth the risk?

I might be wrong about this one (the post on is from a stranger too), but there’s too many question marks – therefore – I’m out! If it turns out to be a solid company and a good investment, good for them. It’ll bring money to research and remove all the question marks from their pitch next time :).

The steps above and a good research and read through various forums will give you a good idea – or at least a feeling whether you should invest or not. If you still have questions and are not sure after doing all this research, don’t invest. Or just a small amount that you are prepared to lose – say 50 USD. If the ICO is successful and brings a lot of returns, this small amount will still grow nicely. If it goes to shits, you won’t mind much.




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