We continue our topic of discussion of this issue. Here is the link to the first part
No code storage is a sign of ICO fraud
A big topic where experts urge caution. Where is she? Nobody will answer. Today, almost 97% of companies organizing ICOs to raise capital declare the openness and publicity of their developments.
If there is such a statement, then the blockchain, as the program code of the cryptocurrency network, must be placed in a special storage. But where do such repositories exist? The Github service is most often used for these purposes.
Before investing, you should check the reality of the openness of the code and ensure that it is updated regularly. On average, well-known companies make changes at least 1-3 times weekly.
When there is no code in the public domain, you should be seriously wary and think about the serious intentions of the project organizers. Perhaps this is a scam during the initial sale of tokens. This situation certainly proves the team’s lack of developments. Therefore, the ongoing ICO is most likely fraudulent.
Lack of company goals
Any startup whose organizers hold a token sale must have a clear purpose for its existence. Quality projects always provide realistic, clearly defined goals.
Each stage and point is described in a competent form, highlighting specific deadlines for achieving goals. In the absence of a clear explanation of the tasks being solved and the purpose of the work, you need to think about the good intentions of the team.
Perhaps there are some initial omissions here, so a particularly careful check of this project is required.
Unclear investment plan
A mandatory section of the White Paper of a project conducting an initial placement of tokens should include items for spending investor money. While studying this document, you need to pay attention to how the developers highlight the point of spending their tokens or cryptocurrency.
How long are they not going to use these coins. If this point is not clearly commented on, then a situation with a collapse in the quote of the digital coin is possible. Soon after the launch of the blockchain project, they will make a large sale of coins, which will provoke an exit scam – a collapse in the exchange rate.
Large amounts of money should not go to team members, such as salaries or some kind of bonuses. Serious companies allocate the bulk of their funds to the technical aspects of the project, development, and marketing. Other goals are allowed, the solution of which is necessary for the project.
No registered legal entity
Every initial token sale must be conducted by an organization. Such companies are required to have an official name as well as registration. The number received during registration must be available to users so that they can verify the legality of the project.
There are special registers in which you can control this point. The legal entity number must be written down in the project’s White Paper and indicated on its website.
Nuance! By the way, during the initial token sale fraud, scammers may provide completely different data. For example, indicate the legal entity number of a real-life, legal blockchain project. You need to check your data more carefully so as not to fall for this trick!
Here, it is advisable to register in one of the states where the jurisdiction has favorable conditions for activities related to cryptocurrency and blockchain. These are, for example, Gibraltar, Switzerland or Malta. But not the USA, where the authorities are inadequate and strive to appropriate someone else’s property.
Concealing the dynamics of token sales
As soon as token sales start, honest projects begin to periodically publish information. Can be seen:
– how many coins were sold;
– how many coins are left;
– perhaps the pace of sales;
– volume of funds collected;
– and so on.
Investors should look for transparent token sales where the organizers are not trying to hide anything. If ICO data is hidden, fraud should be suspected. It is better not to invest money in such an enterprise, otherwise carelessness and naivety will cost the amount invested.
Conclusion
Despite some decline in the excitement around cryptocurrencies, new blockchain projects continue to appear regularly. Many of them conduct ICOs to raise money to complete development and launch the system.
Of course, this opportunity continues to be used by scammers who create fraudulent token sales. You need to remember the 10 bright signs of a fraudulent token sale discussed in order to promptly recognize fraud during an ICO.
