What are ICO Scams and their Types?

Do you consider cryptocurrency to be limited? New cryptocurrencies keep taking place each month. A series of new tokens and coins keep introducing a series of initial coin offerings known as (ICOs).

However, some factors may convince scammers interested in investing in fraudulent ICOs. 

What are ICOs?

These are the famous fundraising methods that companies and initial startups use. Well-settled and popular companies use IPO, while startups and risky companies use ICO.

There is no doubt that many ICOs have provided good returns for investors, and some of them have caused fraud. The vital thing to keep in mind is there are some scams related to ICOs in the crypto-asset industry. But with all this you should still invest in Bitcoin in 2022.

Types of ICO Scams

Here are basic types of ICOs, including the following ones.

1. Exit Scam

It is a deceitful operation that unscrupulous cryptocurrency promoters organize that collects funds for an ICO, and they disappear without informing investors. However, more than 100 million frauds were reported as being stooled as an exit scam.

2. Bounty Scams

Bounty scams are another type present in the cryptocurrency ecosystem, and many ICO projects agree upon its presence. In this scam, ICO remains unable to pay promoters promised financial rewards for PR activities.

3. Exchange Scam

The exchange scam occurs when developers misinform investors to launch ICO through the fake exchange.

4. URL Scams 

URL scams are another common type through which people create fake websites. These sites are similar to real ICOs and instructing users. It leads customers to deposit coins into a compromised wallet. Many investors who cannot identify authentic websites become fool by these fake websites and get harm on their ICOs.

5. White Paper Plagiarism Scam

In this scam, the scammer copies the white paper of a promising ICO and presents it using it with a different or similar name.

6. Ponzi Scheme

In this type, organizers persuade new investors to invest funds to produce high returns with little or more risk. However, these organizers are sharp and are deceitful and attract actors towards new money. In this way, they earn money from promised payments and gain extra cash for their personal use.

The Riskiest ICO Scam

Researchers claim that “phishing and fraud” is the most prevailing type of ICO scams. In this way, users can obtain spam emails, questions for personal and financial details, suspicious links and popups balances disappearing from wallets, errors on withdrawals, pending withdrawals, and other dysfunctional operations.

However, developers and promoters have multiple tactics due to regulations. No doubt, the fraudulent transactions are made in massive amounts. It means governments and regulatory agencies need to take measures to shield investors from severe harm.

Get to Know the Project before Investment

Each project involves many factors behind the success of any ICO campaign. There are many popular cryptocurrency projects to invest an amount with complete trust. While many projects may have their physical appearance as authentic, they are fake. In this way, it has become common for scammers to create counterfeit biographies and fake founders for their projects.

So, how can you protect against the frauds and know about these frauds before investing in any project? Keep in mind to search about the project founder on an authentic platform like LinkedIn and other social media platforms to find its reality. If you see their portfolios, check out if it seems real or fake, plus you can check the number of followers and likes along with comments.

Conclusion 

All in all, you must know about the development if it is actual and check if their qualifications meet the criteria. In addition, check whether founders match the experience they claim and it is relevant to the projects they are choosing to invest in. 

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