As the Bitcoin price grows, so do the ICO scams that use the token as a way to rob investors of their funds. In this article, we will look at the new ways scammers are using to defraud investors, as well as how to avoid falling victim to them.
The ICO (Initial Coin Offering) has overtaken VCs ( Venture Capitalists) as the preferred way to raise capital. However, the ICO has many more risks than VCs as the blockchain community is still far from its main goal of being used as a mainstream payment method. Learn how to avoid ICO scams.
ICOs are all over the news, and many companies are using them to raise money for their newly introduced tokens and blockchain ventures. In most cases, their digital coin offerings are no different than the $100,000 per plate dinners, yacht parties, private jets, and celebrity appearances they hold during their ICO pre sale. Some ICOs will even pretend to offer a promising product, but will have nothing behind their venture.. Read more about bitcoin scammer list 2020 and let us know what you think.
Although ICOs have largely been replaced by IEOs and other fundraising methods in recent years, there are still many projects that raise money this way. Due to high investor interest and the lack of robust regulation, ICOs act as a hotbed for scammers of all kinds.
A report published by CipherTrace in May 2021 shows that major thefts, hacks and frauds involving cryptocurrencies have already reached $432 million this year, with DeFi-related hacks accounting for more than 60% of the total. By investing in Fi projects, ICOs based on Bitcoin, Ethereum or another blockchain, investors bear high risks in the hope of reaping huge rewards in the future.
CipherTrace : The number of DeFi hacks in April 2021 has already surpassed last year’s figures.
Another report released by the Federal Trade Commission shows a frightening statistic of skyrocketing losses suffered by cryptocurrency investors over the past two quarters.
Federal Trade Commission : Investor losses in cryptocurrencies have reached parabolic levels in recent months.
In this article, we look at the biggest ICO scams that took place in 2020 and give some tips on how to avoid them.
Major ICO scams
Fraudulent ICO campaigns often invent fictitious leaders with imaginary credentials and fabricate fictitious partnerships with big names.
That’s exactly what Miami-based cryptocurrency company Centra Tech has done, naming Mastercard, Visa and Bancorp as partners. The company also filed a false money transfer license. After all these claims, the company managed to collect millions of dollars from its victims. The founders first waved $15 million, then the amount increased to more than $60 million. Now their co-founder Robert Joseph Farkas is in jail.
Pincoin and iFan remain the largest cryptocurrency projects among fraudulent ICOs. Vietnamese cryptocurrency company Modern Tech has managed to raise $660 million and promises a fixed income for people who invest in their tokens. Of the blockchain scams, the most common is the exit scam. This fraudulent practice was also used in this case.
The infamous list of top scams includes Plexcoin, Bitcard, Opair and Ebitz, Benebit, Bitconnect, Confido, Ponzicoin, and others that defrauded between $15 million and $200,000 from gullible investors between 2015 and 2018.
Another popular way to trick the public is to pretend to be a celebrity. For example, a study by the artificial intelligence firm Bolster claims that about 90 percent of all such scams were conducted under the name Elon Musk. Other familiar faces include John McAfee, Bill Gates and Yusaku Maezawa.
Finally, the sad story of 2020 can be concluded with a long list of incidents summarized by the popular technology news portal Zdnet. Some of the big names that have suffered significant losses include Poloniex, Helix, AT&T, Kucoin, GoDaddy, and many others.
Blockchain hacking in 2020
However, the ICO scam is not only responsible for the loss of investor funds. Of the more than $5 billion raised in 2017, ICOs lost between 7% and 10% of their funds to fraudulent activity. In 2020, the figure is lower, but still impressive. According to the Atlas VPN team, approximately $3.8 billion was stolen through 122 hacking attacks.
In 2017, a bug in the wallet’s code allowed Ethereum to be hacked and $30 million worth of Ether to be stolen. In 2020, Ethereum DApps remain the most enticing of blockchain hacks. The number of successful cryptographic attacks on ETH DApps reached 47 in 2020, with a total of 122 at the time of writing.
Atlas VPN : The amount of money lost to blockchain hacks in 2020 is unimaginable.
Signs that an ICO is a scam
How do I know if an ICO is a scam? Watch for the following signs, which are often the hidden signs of a fraudulent scheme:
There is no white paper or it is very weak.
The site does not inform visitors about the team.
The objectives of the project are not clear and there is no roadmap on the website.
A pyramid structure is used.
A large number of pre-drawn chips. Too many chips are distributed among the team members.
How do you prevent ICO fraud?
As long as regulation is still weak, you as an investor can only rely on your vigilance. There is an open Ethereum-related scam database that keeps track of existing Ethereum-based scams. Users can therefore consult this resource at any time to see if a project is listed as a fraudulent ICO.
The experts at TokenGuard, a BlockHunters-backed service that verifies smart contracts, recommend first-hand verification:
Any project that does not publish the names of team members should be immediately suspect.
Don’t be fooled by the big names of project managers. Usually they have no real influence on the project and its implementation.
Never use an Ethereum wallet address sent by an unknown person. Use the information on the official ICO website.
Experts recommend that ICO valuations be considered carefully. Vulnerabilities in smart contracts are often exploited by hackers. Therefore, checks on smart contracts should be monitored by reputable companies to reduce the chances of cryptocurrency hacking.
To ensure that the web application is secure and that the smart contract is written without bugs, it is useful to check for vulnerabilities with a third party organization such as Tokenguard.
Be aware of phishing sites, which are probably the biggest threat to cryptocurrency ICOs and potential investors. These sites are copies of real projects, making it difficult for users to determine which site is official and which is not.
Follow these simple safety rules and always consider who you are entrusting your money to.
Denial. This is a paid press release. Readers should exercise due diligence before taking any action with respect to the company advertised or any of its affiliates or services. .com is not responsible or liable, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services referenced in any press release.Looking for the next ICO to invest in? Here’s some helpful information before you invest. Just remember, it is not easy to identify an honest ICO. But it is easy to recognize a scam, so check out the below example before investing.. Read more about initial coin offering 2020 and let us know what you think.
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