How to Spot a Fake ICO?

Block Gemini
Feb 26, 2018 · 5 min read

You know my methods, Watson.

Did you just encounter an ICO advertisement promising enormous return? Or does the tagline read “PRESALE SOLD OUT IN A SECOND?” With exponential growth in public interest, esoteric terminology and lax regulatory framework, it is no surprise that some ICOs have been used to fund scams and cheat investors of their money.

It is becoming harder and harder to spot a fake ICO simply because scammers are getting better at it, it’s never too late show them you’re the best.

We’ve got ourselves to put together few tips to build a Vocab for Beginners thinking of investing in an ICO. You might want to take a quick look at the tips to make sure you crack the right nut.


The Blockchain movement is all the rage these days converting numerous companies, including tea corporations and photography giants, into its followers, but there always should be a purpose the ICO strives to serve. Whether it is realistic and full of potential? Note that not every venture is required to leverage the Blockchain technology for its functioning. In this case, moot question to be asked is whether Blockchain and support of ICO tokens are really necessary to reach the stated goal. If no, you just need to walk away.


You need to go through the contents of the white paper. Whitepapers usually explain how the platform works. If your project claims that it is building some sort of decentralized service or token with new features and actually provides no explanation of how it works specifically, then it’s a SCAM. Scammers tend to come up with attractive jargons to make the sentence look great in order to fascinate their audience. Do not be surprised!

The business white paper ought to contain strategic plans, milestones or the roadmap. The Technical whitepaper has to properly explain the underlying stack of technologies and provide in-depth insight to their working.

Look for a clear roadmap — see if you understand the plan and the timing mentioned are feasible. If the roadmap is not clear, then it might indicate that the project is motivated by the short-term financial gain rather than a viable longstanding plan.

Look for the specific set of information — when you go through the whitepaper, ensure that it covers all the details outlining the mission, as well as technical and critical features behind the venture. Then check how advanced and capable the technology is and whether the proof of concept (Documented evidence) has been done or not. The proof of concept could help you gauge the potential of the product and how successful it can turn out to be. You can feel the veracity of the project with the detailed description of the underlying technology. It should also comprise the entire detail of the token flow.

STALK THE TEAM (Easy isn’t it…?)

You should try and acquire as much knowledge about the people behind the project. Noble crypto Columbuses have nothing to hide — their profiles should be visible and authentic (it would not hurt to do some background check: websites, previous projects and social networks). It could provide you information related to their experience, stories and the details about the communities they have been associated with. If you doubt the credibility of the team members, do not let them cash in on your naivety.


Public blockchain-based ICOs usually are open-source. That means the code of the project should be available in the GitHub type repositories for the purpose of its examination. Expert analysis of those codes (performed by programmers) can affirm the validity of the ICO.

If the project does not have its code there or if it is simply a copy of already existing codes … no one is compelling you into investing in it.


An escrow is a service or a wallet where the coins of the investors are kept till the certain deal is completed — after that the fund can be released. In the case of not meeting the planned deal, the money is returned to the corresponding investors. The handling of the funds in the ICO related projects is done through the same kind of escrow system, which is handled generally by known and credible members.

The famous incidence of deClouds ICO is an example of compromised escrow members — a single person disguised and carried more than one key to transfer the funds that eventually lead to loss of $9 million.


While analyzing the project, you can identify whether the fund required for its successful implementation is appropriate and realistic or not. The mentioned amount should be neither too high nor too low.


Watch out if the percentage of tokens is benefitting the developers majorly. This step will help you in revealing the intention of the whole project — maybe it is simply the maximization of personal gain of the founders. Although the early investors and the developers deserve to be benefitted, it should be done in a balanced way and without compromising the viability of the blockchain network. It is definitely a matter of concern if the total reserved percentage of premined tokens is high throughout the lifeline of the project.

The founder of Paycoin had deployed this strategy i.e. keeping a high percentage of total tokens in premined form for its developers in order to maximize the personal financial gain from appreciating the value of the token. Eventually, he got accused of carrying out the scam of around $9 million.


Checking reviews of other investors on online forums as well as looking for proof of endorsements and involvement from reputable figure can help you significantly in knowing about the ICO. Additionally, it provides an opportunity to clear your doubt by allowing you to ask for the opinions and suggestions. BitcoinTalk and Reddit are some of the popular forums available. And yes, be aware of the people who manipulate using fake accounts on such platforms.


As we know, at this time ICOs are quite unregulated; this could be considered both as a pro and a con because it is a faster way for companies to bypass the rigorous and regulated capital-raising process required by capitalists and banks. But still, there is no way to control these kinds of sales. In fact, the lack of legal guidelines has resulted in more than a few scams, and investors can find it challenging to understand if there is a potential opportunity or if it is a Ponzi scheme.

Of course, this doesn’t mean that all ICOs are bad. There may appear absolutely brilliant ideas behind some of them.

Always remember, a scammer will always leave a clue behind. You just need to find that clue.

Block Gemini

The Block Gemini team boasts an exciting combination of Ethereum Developers, Hyperledger Managers, Crypto Researchers, Programmers, Developers Analysts and Designers - all true professionals in their respective field.

Block Gemini

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Passionate about the development of decentralized applications, IoT, A.I, and Blockchain solutions for Enterprise clients through innovation and research.

Block Gemini

The Block Gemini team boasts an exciting combination of Ethereum Developers, Hyperledger Managers, Crypto Researchers, Programmers, Developers Analysts and Designers - all true professionals in their respective field.