By Olga Grinina
With ICOs already topping the 2017’s record, the major question is how we hold accountable those raising millions of dollars in a matter of days? Traditional VC would require CEOs and CFOs to sign numerous legally binding agreements and term sheets and insist on publishing quarterly reports on financial performance. But how do we exercise this mechanism of control over funds in the realm of ICOs? And probably most importantly — how do we distinguish a legit ICO and protect ourselves not only from bad actors seeking to collect investors’ money and disappear, but also from multiple varieties of phishing and hacking schemes that accompany crowdsales making your crypto wallets an easy target?
Fear not Facebook, but Twitter
If you want proof that crypto scams have gone mainstream, look no further than Twitter. Fraudsters copy pages and profile photos to promote Ether giveaways onto followers and spreading crypto gossip, so it makes sense that scammers are flooding the platform. Crypto celebrities are inserting disclaimers into their profiles stating there are not giving away Ether. Many cryptocurrency exchanges, including Coinbase, have also issued warnings. Elon Musk and Vitalik Buterin are among those targeted by the bot army. What’s more alarming is that researchers estimate that the rate of phishing likely reaches up to 5 percent of all crypto-related conversations on Twitter!
Listen and learn
It’s fairly impossible to monitor every up and coming fraudulent activity, it’s probably more useful to explore ways regulators and big players are fighting against it. Over the last couple of months the governments have become extremely proactive on cracking down the scams and seeking for ways to raise the community’s awareness with SEC leading the way. Not only did they launch their own fake ICO to demonstrate how easily one can be dragged into fraud or a ponzi scheme, but also scrutinizing the vague disclosures about how the money they raise will be used, and which rights their token holders will have. Educate yourself and also don’t forget to do your own due diligence before making any investment decision. The US government agencies are getting more active in their fight against such cryptocurrency scams. The SEC previously charged the founders of Mayweather and DJ Khaled backed cryptocurrency startup, Centra Tech, with fraud. The US Federal Trade Commission will also be hosting a workshop to spread awareness against cryptocurrency scams.
Still a lot of issues with Ethereum
Everyone keeps talking about Ethereum’s scalability and security issues. The major take away for a crowdfunding process is that the smart contract used for receiving funds is a very easy target. Internet security companies keep discovering security vulnerabilities in blockchain platform that allow attackers to take over the networks. Normally ICOs assure that most of these vulnerabilities are fixed, but how can you be sure? And are you using your ether wallet safely in the first place? Have you installed any security plugins like Metamask? Are you precautious of visiting phishing websites? Have you stored your private key in a safe place, which is probably not your laptop’s desktop?
New artful cheat schemes are emerging every other week and it might be a never-ending fight. Yet, we as community need to become extra-cautious and make extra effort about building our own system of mutual support and advice, whether it be following government educational initiatives, attending public workshops, making our voice heard at emerging decentralized online reviews platforms or simply by discussing the latest exit scheme on Twitter or Reddit.
