How to spot and avoid fake cryptocurrency companies and websites
All of these new coins and tokens come from a series of Initial Coin Offerings (ICOs). Since this is an unregulated industry where anyone can launch their coin or token, the appetite for these opportunities has grown from a wide pool of investors.
Therefore, there is no guarantee that any cryptocurrency or blockchain-related startup will be legitimate or successful. But I’ll outline a few steps below to help you be as sure as possible that you’re not falling for a scam website.
Know the team
Although there is unity in the cryptocurrency industry, you need to know the team behind the initiative.
The website must have a page that shows the developers and the administrative team behind the project. This is the most important factor for any ICO or cryptocurrency.
Prominent names dominate the cryptocurrency space. For example, superstar developers like Ethereum founder Vitalik Buterin can decide whether or not a new project comes to fruition simply by having their name listed on a development team.
Scammers can therefore easily invent fake founders and biographies for their projects. It is therefore important that you thoroughly research the individual team members of a project before investing.
If you can’t find information about a particular developer or founder on LinkedIn or other social media, steer clear. Once you have the profiles, check if their activity matches the number of followers and likes they gather.
You also need to check if their qualifications match. Their qualifications must match the experience they claim to have that is most relevant to the current project.
Any website without the above factors is a scam website.
Be thorough with the whitepaper
You need to read a company’s cryptocurrency or ICO whitepaper thoroughly before thinking of investing. This is because it is the foundational document for that project that is expected to lay out the background, goals, strategy, concerns, and implementation timeline for any blockchain-related project.
The white papers tell you everything you need to know about the project
Note that scam websites usually have an eye-catching design but lack a fundamentally sound concept. They are usually perfect, and you can hardly spot any mistakes.
A reputable company, on the other hand, may have a website with spelling errors, but the whitepaper consists of a rock-solid concept and a carefully thought-out implementation plan.
So check to see if the whitepaper has complementary resources, including financial models, legal aspects, an analysis of SWOT, and a roadmap for implementation.
Avoid companies without a whitepaper at all costs
Another challenge is that a fraudulent company can come with a compelling whitepaper. For example, PlexCoin managed to raise more than $15 million before the U.S. Securities and Exchange Commission (SEC) stepped in to shut it down.
All you need to make sure is that the whitepaper states the following:
- How the company plans to succeed.
- What actions it will take to achieve its goals.
- Review and monitor the Token Sale.
To facilitate the crowdfunding process. an ICO will depend on a token or currency system. A reputable company will ensure that the system and the progress of the token sale are easily visible to potential investors. Such a company doesn’t have a skeleton in its closet.
Most fraudulent ICOs usually hide their token sale progress under the guise of individual contribution addresses, preventing potential investors from seeing exactly how much has been raised and how much time remains in the sale.
This is mainly done to create a sense of urgency among potential investors, even if there is no sign of a successful sale happening at the same time.
Feasibility of the project
Legitimate companies develop ICOs and cryptocurrencies that have the basic structure to outlast their competitors.
To identify a reputable company, it must have an achievable, feasible set of goals. This is your best chance to invest in such a company.
Even if the company has a compelling concept, it must put that concept into action in the short and long term.
A reputable company is usually transparent and they keep you informed with regular, detailed progress reports on their website or social media. They’ll even do this by sending you regular emails and newsletters that give you the timeline for the development process.
Make sure that you don’t follow the bandwagon of those who get into the cryptocurrency business to get rich quick.
Fraudulent companies, usually through their websites, propose projects that sound too good to be true.
The solution here is that you need to question every detail. Be aware that the absence of important information is an attempt to hide an unsound model or concept.
You can also look for outside sources to verify the legitimacy of a project before you invest. This will help you avoid falling into the hands of scammers.
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Nothing on Cryptinus constitutes professional and/or financial advice. Always think for yourself and make sound decisions when investing. Never invest money that you can’t afford to lose.