The Origin and Ongoing “Success” of ICO Scams in Crypto

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Cryptocurrencies have been a disruptive force in the world of finance, promising to revolutionize how we think about money and transactions. While the potential benefits of cryptocurrencies are undeniable, so are the risks. One such risk is the proliferation of ICO scams, which have become a significant problem in the crypto space. In this article, we will explore the origins and ongoing success of ICO scams in crypto and the steps that can be taken to protect investors from falling prey to these fraudulent schemes.

Initial Coin Offerings (ICOs) have been a popular fundraising mechanism in the crypto space since 2013. They allow blockchain startups to raise funds from investors by issuing their cryptocurrency tokens. However, as the popularity of ICOs has grown, so has the number of scams.

ICOs have been used to defraud investors of billions of dollars, leaving many questioning the legitimacy and long-term viability of the crypto market. 

What is an ICO?

An Initial Coin Offering (ICO) is a fundraising mechanism blockchain startups use to raise capital. In an ICO, a company issues its cryptocurrency tokens to investors in exchange for cryptocurrencies such as Bitcoin or Ethereum, or fiat currency like USD. 

Investors buy these tokens with the expectation that they will increase in value over time, allowing them to profit.

The Origins of ICO Scams

The first ICO, Mastercoin, was launched in 2013 and raised over $500,000. Since then, the ICO market has exploded, with over $30 billion raised in 2018 alone. Unfortunately, however, with the rise of ICOs, the scams have also come.

ICOs were largely unregulated in their early days, and scammers took advantage of this lack of oversight to defraud investors. As a result, many ICOs were launched with no real product, no real team, and no real plan, and investors were left holding worthless tokens. 

These scams damaged the entire crypto market’s reputation, leading many to question the industry’s legitimacy.

Why are ICO Scams So Successful?

ICO scams are successful for several reasons. Firstly, they are often marketed with slick, professional-looking websites and whitepapers that promise huge returns on investment. But, unfortunately, these materials often use complex technical jargon and buzzwords, making them difficult for the average investor to understand.

Secondly, many ICOs are launched when the market is experiencing a boom, leading investors to believe they are missing out on a great opportunity. This FOMO (Fear Of Missing Out) can lead investors to make rash decisions and invest in scams without proper due diligence.

Finally, ICOs are often marketed through social media channels and online forums, which can make them seem more legitimate than they actually are. Scammers use fake social media profiles and paid promotions to create a false sense of credibility around their ICO.

Red Flags to Watch Out For

There are several red flags to watch out for when investing in an ICO. Firstly, be wary of ICOs that promise huge returns on investment with little to no explanation of how they plan to achieve these returns. Also, be wary of ICOs with poorly written whitepapers or a lack of a clear business plan or roadmap.

Another red flag is an ICO with a weak or non-existent team, with no credible experience or track record in the industry. Additionally, be cautious of ICOs with no working product or prototype, as this clearly indicates that they may be a scam.

Finally, be cautious of ICOs with no real use case or clear market demand. That is a common tactic used by scammers to sell tokens that have no real-world value.

Industry Impact

The fallout from ICO scams has been significant, with billions of dollars lost to fraudsters. In addition, ICO scams have damaged the reputation of the entire crypto industry, leading many to view it as a haven for scammers and fraudsters.

This has harmed legitimate blockchain projects as investors become more cautious and skeptical of new ICOs. It has also led to increased regulatory scrutiny, with many countries worldwide cracking down on fraudulent ICOs.

Regulatory Pushback

Regulators worldwide have taken steps to combat ICO scams, with many implementing new regulations and guidelines to protect investors. The US Securities and Exchange Commission (SEC) has been particularly active in this area, cracking down on fraudulent ICOs and prosecuting scammers.

Countries like China and South Korea, have banned ICOs altogether, citing fraud and money laundering concerns.

How to Protect Yourself from ICO Scams

There are several steps that investors can take to protect themselves from ICO scams. Firstly, conduct thorough due diligence before investing in an ICO. That includes researching the team, reading the whitepaper, and analyzing the business plan and roadmap.

Investors should also be cautious of ICOs with unrealistic returns or no clear use case. Additionally, they should be wary of ICOs that use paid promotion or social media hype to create a false sense of legitimacy.

Finally, investors should always be skeptical and ask questions. If something seems too good to be true, it probably is.


ICO scams have become a significant problem in the crypto industry, damaging the reputation of the entire market and costing investors billions of dollars. However, some steps can be taken to protect investors from these scams.

By conducting thorough due diligence, being cautious of red flags, and asking questions, investors can reduce their risk of being defrauded. Regulators worldwide are also taking steps to combat ICO scams, increasing oversight and cracking down on fraudulent ICOs.

Ultimately, it is up to investors to be vigilant and protect themselves from these scams to ensure the crypto industry’s long-term viability and success.

None of the information on this website is investment or financial advice and does not necessarily reflect the views of CryptoMode or the author. CryptoMode is not responsible for any financial losses sustained by acting on information provided on this website by its authors or clients. Always conduct your research before making financial commitments, especially with third-party reviews, presales, and other opportunities.