Scams date since the early days of the Internet. Just a brief Google search will bring you millions of results. And while some people make mistakes, there are others who make huge amounts of cash off it. Where there’s money, there are scams. And with the recent ICO hype – more so than ever.
Currently, there are over 1,000 ICOs and to conduct due diligence on each of them would be incredibly time-consuming, even for an experienced analyst, let alone a novice investor. And while nothing beats high-quality due diligence, being aware of several immediate red flags to steer clear of bad ICOs or scams can be really helpful.
Anonymous Team or Team that Has Little or No Experience
Getting to know the team behind an ICO is probably the most crucial element when you’re doing your due diligence.
A definite red flag is a completely anonymous team. If that’s not the case, you should also be cautious about the team’s leadership and whether they have the experience required to run a project in that specific domain.
While LinkedIn is regarded as the #1 professional platform, it’s essential to note that it also has its flaws, as LI profiles can be faked.
Additionally, ICO websites usually enlist their advisors. Running a due diligence to verify they are legitimate is highly advisable.
Bold Claims and Unrealistic Goals
Scam projects typically have unrealistic goals and are characterized by extremely bold claims about their core product, even though the said projects have nothing new or disruptive to offer.
Avoid ICOs that promise to tackle things like ending poverty, bringing a fix to global warming, or even replacing Bitcoin. If the ICO in question has that potential, its developers will never promise such things. They’ll just let you know about the project’s potential, and that’ll be it. No serious development team will ever predict its token price or claim to fix world issues.
No Code Repository
Some regard this as “Code Is Law”. Be it Github or Sourceforge, the ICO project should provide a link to its code. If there is none, that’s an immediate red bell ringing in your head. Even if there’s a link, make sure it’s genuine and not merely a clone of another project with just a few cosmetic changes in the code lines.
A Referral Program with Levels in Place
As soon as you see a referral program that has a pyramidal structure with different levels, that should be an instantaneous sign that something’s stinky. Steer clear of ICOs that have this kind of referral program. Most probably that’s a scam.
No Media Coverage of the Brand
While exploring an ICO’s website, ensure it’s been featured in various online media. Good ICO projects are usually covered by different media, including regional and worldwide cryptocurrency websites, as well as influential media like Forbes, Entrepreneur, etc.
If the ICO has not been featured anywhere or has very few links on the website, that’s a red flag.
No Active Support
A good idea before deciding to invest in a given ICO project is to test its support line. Drop them an e-mail or call them on the phone (if that’s an option). Steer clear of ICOs that don’t list their e-mails or those who take several days to answer.
After all, you’ll have to know that you can rely on them if any issues arise with your investments and an inactive support should ring your red bells.
Very Low Social Media Engagement
Take a careful look at the social media channels of the ICO. If there’s zero effort put in developing the various social media, especially the Telegram group, where most of the communication usually happens, that should raise the red flag.
Also check out how often the ICO posts. Good ICOs will post at least once a day if not more, keeping its audience and investors updated about the latest developments.
Characterized by extreme volatility, the cryptocurrency world is constantly evolving. While you can never be certain about a project, if you carefully do your due diligence, keep away from red flags, and act upon logic, not emotions, you should be fine.