ICO Scams Damaging the Blockchain

Matt Lockyer
Aug 8, 2017 · 4 min read
Help keep blockchain technology safe

I’ve been researching blockchain and ICOs for almost 4 months now and came across some pretty interesting scams. And why not with so many easy step by step guides. I’d like to classify a few here.

The fake pre-sale scam

Recently several ICOs have had their website up and a timer countdown to the public ICO. PUBLIC is not PRE-SALE, but those who wanted in early would be tempted by a pre-sale address.

So several websites crop up that clone the original and offer a pre-sale address. Bonus for the ones that actually deploy a smart contract on etherscan but few do and the pre-sale address is simply an ethereum address.

You’ve been warned.

The phishing scam

We’ve all likely been to MyEtherWallet, and poor UX aside, it’s relatively easy to create a website that looks like this one and feels legit. Recently STOX had their ICO and users of their Telegram channel were getting spammed with a fake website: myethervallet (notice the v / german wallet pronounciation?).

This phishing site encouraged users to upload their private keys or keystore.json files, leading to whole wallet hacks of all tokens and ether, not simply a few mis-sent ether.

The scam ICO

Now here’s the granddaddy of them all. The scam ICO is a website, smart contract (or not, come on people…), social media etc… around an idea that is virtually impossible to execute.

Take eros.vision the decentralized marketplace for sex… red flag anyone?

5 million cap, moved to 19 million shortly after reaching the cap.

2 smart youngsters figured out enough tech jargon to make this seem plausible. Yes the team was only 2 guys. One LinkedIn profile and one github profile, with minimal commits. NO WHITEPAPER (a borrowed one). NO SMART CONTRACT. NO TOKENS. In reality, users were sending their eth to an address, not a smart contract.

First the ICO was set at 10 million, then 5 million, then 19 million. This should have raised even more red flags for people.

The ICO closes and guess what? In prompt fashion their website and twitter account are “suspended”.

Hmmm, why did they choose the name “eros” in the first place?

Legality aside of how this app and marketplace would even have been possible to make, and launch, and get a user base, without these 2 dudes going to jail… My belief is that the founders were set to jet the moment the ICO closed and we’ll never hear from them again.

Prove me wrong 2 man eros team. Maybe you could use some of that 19 million to, I don’t know… get a different name and actually distribute the non-existent eros tokens?

Summary

Take it from a programmer learning to write smart contracts and having reviewed tons of ICOs recently. It’s the wild west out there.

Any ICO needs the following (and probably a lot more):

  1. Months if not years of prior application experience in the domain (check github, LinkedIn profiles etc…)
  2. A large, real and competent team. Look for heavyweights as real team players, active advisors and get to know these people.
  3. ONLY send your money to a SMART CONTRACT connected to a TOKEN contract. Ask a programmer friend, “if I send eth here, will I get a token?”
  4. What is the tokens utility? Is there any? It’s fine if it’s a security but is the team being honest about this to you and themselves?
  5. What’s the roadmap? Is this project legally possible? Is there a market? Is it feasible, viable, etc… Can this team pull it off?
  6. How much are they raising? If this is shifting around… you’re in trouble. A competent team will have their budgets and needs forecasted well in advance, regardless of the volatility of crypto prices.

Ultimately, I agree with many others that we need more public due diligence, but even then, there’s a lot of infrastructure not in place. Where are the best ICO scam alert resources?

For now, everyone should be educating themselves on what a good ICO looks like and avoiding anything to the contrary.

Good luck out there and stay safe!

Matt Lockyer

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Building Blockchain Solutions to Real World Problems - "The revolution will not be centralized."

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