Shame and scam: the five ways in which the ICO deceive their investors and find themselves deceived
The word scam has almost become synonymous with the acronym ICO, meaning crowdfunding projects through the release of its own cryptocurrency. The format itself is not to blame for this, and there are enough decent and really worthy projects among the ICO. But the novelty of the topic, the heat of easy money and the almost complete absence of regulations have turned this market into the Wild West, where no one is immune from fraud - neither cryptoinvestors, nor ICO itself.
Probably one of the most illustrative cases of what good respectable start-ups should be prepared for, which really raise funds for the implementation of their projects. In July of this year, Coindash entered ICO. Many investors are interested in her project (now it doesn’t matter what it is).
On the very first day after the start of the ICO, several million US dollars were raised. But, unfortunately, these funds did not go into the company's wallet, but into the accounts of an unknown intruder. The fact is that a cracker managed to pick up the key to protecting the company's website, and simply replaced the data of the Coindash wallet with his own. The substitution was not immediately detected, users without the slightest suspicion sent money to a fake wallet.
Until the discovery of the fact of hacking, "left" took more than $ 7 million. Moreover, transfers continued to flow even after the investors were notified by the organizers. Users who sent the money to the scammer felt that this was a deliberately planned action by the Coindash administration and declared their readiness to go to court. As a result, the money disappeared, ICO did not take place, and the company earned itself a negative reputation in the eyes of the community.
Another case that also occurred in 2017. This is a startup Declouds . He declared himself a quite serious company with an interesting project. The organizers have repeatedly published photos in which its representatives communicate with major businessmen who are clearly interested in the proposed idea.
The picture above is pure photoshop, in fact there is no one behind the podium, it was placed in the place of another banker who was present in the real photo.
Naturally, after collecting money, this company disappeared from the horizon, and its representatives are still looking for. The most interesting thing is that the first about the fraud on the part of Declouds said the project adviser.
Cryptocurrency users work with a variety of wallets. One of the most popular solutions is the MyEtherWallet wallet. This is a really well-protected system, which you can trust your funds. But the problem is that the MyEtherWallet site itself is often copied by scammers using other URLs and distributing them during various ICOs.
The most striking case is the deception of investors who wanted to support Bancor's ICO. As soon as the start-up came to the primary placement of tokens, links to the fake wallet, the extension of which ended not to .com, but to .com.co, began to be distributed on the network. This fake resource received a private key of deceived users, after which the fraudsters disposed of funds in the victims' wallets.
Here we are talking about the ICO company EROS.vision (the site is no longer working, the domain is parked). A non-existent company offered a rather interesting idea, which was supported by a large number of investors. In this case, communication with the public was conducted only through Twitter, which in itself was suspicious.
However, hundreds of users have given their money to fraudsters. The most interesting thing is that this company had everything fake. For example, a profile in LinkedIn, Whitepaper (in fact, stolen from Beaver and slightly modified), a dummy account on Github. Plus, the domain of the ICO site was registered just a week before the start of the process of the initial placement of tokens.
Sometimes the cause of scam is not even someone's evil will, but a simple coincidence - for example, the coincidence of the names of tokens. In November 2017, the ways of the inspeer p2p lending platform that is currently going ICO crossed and when the ICO blockchain network of the INS Ecosystem supermarkets already completed by the time this article was published, they chose the same four letters INSP for the names of their tokens, in the first case being a simple abbreviation of the project name (INSPeer), and, secondly, the acronym INS Promo.
The problem came to light on November 8, when, as a result of the “Eirdrop” (mass distribution of promotional tokens) during the INS Ecosystem preseil, the INSP tokens began to arrive to users, investors and friends of ICO Inspeer 777 pieces per wallet - even before the start of their own presale.
An investigation was conducted , during which it turned out that the tokens are sent by the authors of the INS Ecosystem project, who also registered the INSP ticker for their INS Promo token. When a coincidence was found, it was no longer possible to technically change the name of one of the tokens. So investors Inspeer received tokens of another project, and INS Ecosystem renamed their token simply to INS.
Finally - a small checklist for a cryptoinvestor who is thinking of starting to earn on ICO. Before buying any token, you need to first:
As a result, the investor should form a complete picture of what the company and individual team members are doing.
And what kinds of scam do you remember? And do you know projects that would look suspicious at first, but were able to correct their reputation and exceed expectations?
# 1: Hacking the ICO website and stealing investors' funds
Probably one of the most illustrative cases of what good respectable start-ups should be prepared for, which really raise funds for the implementation of their projects. In July of this year, Coindash entered ICO. Many investors are interested in her project (now it doesn’t matter what it is).
On the very first day after the start of the ICO, several million US dollars were raised. But, unfortunately, these funds did not go into the company's wallet, but into the accounts of an unknown intruder. The fact is that a cracker managed to pick up the key to protecting the company's website, and simply replaced the data of the Coindash wallet with his own. The substitution was not immediately detected, users without the slightest suspicion sent money to a fake wallet.
Until the discovery of the fact of hacking, "left" took more than $ 7 million. Moreover, transfers continued to flow even after the investors were notified by the organizers. Users who sent the money to the scammer felt that this was a deliberately planned action by the Coindash administration and declared their readiness to go to court. As a result, the money disappeared, ICO did not take place, and the company earned itself a negative reputation in the eyes of the community.
№2: deception by the organizers of the ICO
Another case that also occurred in 2017. This is a startup Declouds . He declared himself a quite serious company with an interesting project. The organizers have repeatedly published photos in which its representatives communicate with major businessmen who are clearly interested in the proposed idea.
The picture above is pure photoshop, in fact there is no one behind the podium, it was placed in the place of another banker who was present in the real photo.
Naturally, after collecting money, this company disappeared from the horizon, and its representatives are still looking for. The most interesting thing is that the first about the fraud on the part of Declouds said the project adviser.
No. 3: fake wallets
Cryptocurrency users work with a variety of wallets. One of the most popular solutions is the MyEtherWallet wallet. This is a really well-protected system, which you can trust your funds. But the problem is that the MyEtherWallet site itself is often copied by scammers using other URLs and distributing them during various ICOs.
The most striking case is the deception of investors who wanted to support Bancor's ICO. As soon as the start-up came to the primary placement of tokens, links to the fake wallet, the extension of which ended not to .com, but to .com.co, began to be distributed on the network. This fake resource received a private key of deceived users, after which the fraudsters disposed of funds in the victims' wallets.
# 4: another fake ICO
Here we are talking about the ICO company EROS.vision (the site is no longer working, the domain is parked). A non-existent company offered a rather interesting idea, which was supported by a large number of investors. In this case, communication with the public was conducted only through Twitter, which in itself was suspicious.
However, hundreds of users have given their money to fraudsters. The most interesting thing is that this company had everything fake. For example, a profile in LinkedIn, Whitepaper (in fact, stolen from Beaver and slightly modified), a dummy account on Github. Plus, the domain of the ICO site was registered just a week before the start of the process of the initial placement of tokens.
№5: scam unwillingly
Sometimes the cause of scam is not even someone's evil will, but a simple coincidence - for example, the coincidence of the names of tokens. In November 2017, the ways of the inspeer p2p lending platform that is currently going ICO crossed and when the ICO blockchain network of the INS Ecosystem supermarkets already completed by the time this article was published, they chose the same four letters INSP for the names of their tokens, in the first case being a simple abbreviation of the project name (INSPeer), and, secondly, the acronym INS Promo.
The problem came to light on November 8, when, as a result of the “Eirdrop” (mass distribution of promotional tokens) during the INS Ecosystem preseil, the INSP tokens began to arrive to users, investors and friends of ICO Inspeer 777 pieces per wallet - even before the start of their own presale.
An investigation was conducted , during which it turned out that the tokens are sent by the authors of the INS Ecosystem project, who also registered the INSP ticker for their INS Promo token. When a coincidence was found, it was no longer possible to technically change the name of one of the tokens. So investors Inspeer received tokens of another project, and INS Ecosystem renamed their token simply to INS.
How to protect yourself from fraudsters?
Finally - a small checklist for a cryptoinvestor who is thinking of starting to earn on ICO. Before buying any token, you need to first:
- To study the history of a startup, paying attention to his team, third-party projects and everything connected with them;
- Analyze what individual members of the project team did before the ICO;
- Carefully familiarize yourself with the White Paper project by searching just in case on the network its copies on the websites of other companies;
- You can also check the date of registration of the domain of the startup site and the ICO site (if the URL is different).
As a result, the investor should form a complete picture of what the company and individual team members are doing.
And what kinds of scam do you remember? And do you know projects that would look suspicious at first, but were able to correct their reputation and exceed expectations?
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