ICOs remain a risky venture
An alternative controversial way of making money with limited rules and regulations has captured the attention of many investors. It is called the Initial Coin Offering (ICO), which I have talked about before. ICOs were first introduced to the world in the year 2017 along with the digital coins’ market.
The ICOs however have continued to entice scammers and initial coin offering (ICO) exit scams are still being uncovered. As investors continue to show that they are willing to place their money into highly speculative cryptocurrencies, the number of fraudulent cases have continued to rise.
Beware of ICO scams
As we should know by now, exit scams are sadly a part of life when it comes to this new world of cryptocurrency. Perhaps we shouldn’t be surprised, when even the top 100 cryptocurrencies are failing to deliver on their promises, and a sizeable number of ICOs have already been revealed as scams.
?Earlier this year, two blockchain platforms RepuX and JoyToken scammed backers out of $4.7 million and $3.3 million respectively.
?The South Korean Ponzi Scheme – Investors in South Korea, mostly senior citizens, were defrauded of $18.7 million.
?ICO Fraud in Canada - Kevin Hobbs and Lisa Chang defrauded their investors a total of $30 million.
?Taiwan Bitcoin traders Scam – Several Taiwanese men have been accused of defrauding 1,000 investors of $51 million after assuring investors of 335 percent returns.
Before investing into the ICOs, users need to take some time to understand ICOs and how to differentiate a real investment from a scam.
What is ICO?
ICO or Initial Coin Offering is a method of making money by using cryptocurrencies. It is an alternative method to raise funds and is mostly used in projects that have not yet fully developed their blockchain platform, service or product. In ICOs, unique crypto tokens are issued and sold in exchange for Bitcoin, Ethereum and in some cases fiat currency which is also accepted.
Users participate in Initial Coin Offering by using tokens. A token is “a unit of value that an institution creates to govern its business model as well as authorize the users to interact with its product while making it possible to distribute and share the rewards with their shareholders.
Users make investments into certain crypto-currency projects with the expectation that the project will be successful. This steers a lot of demand and in turn, causes the tokens to increase in value.
How to Identify exit-scams?
It’s almost impossible for the average small investor to conduct due diligence on ICO projects. The fast nature of cryptocurrency transactions has allowed frauds to escape with people’s money long before the people even realize it.
As an investor, you will have to assess for yourself whether you believe the technology is feasible, whether there is a use and market for it. Be aware that projects sounding too good to be true likely are.
Get to know the Team, their background, qualifications (do they really understand blockchain?) & lifestyle (is it lavish?).
Is investing in ICO safe?
Ponzi schemes and ICO exits are still prevalent today. Anyone can put together a project, create a convincing website and business proposal through the blockchain platforms.
Investing in ICO campaigns is often a gamble. Blockchain technology is still in its infancy and the regulations are far from comprehensive.
Keep your head cool and remember your investment goals!
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Iggy Go, RFP®, REB, is a Public Speaker, Content Producer and Author of the book
“A Lazy Investor’s Way”.
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