How To Avoid Fake ICOs, Cryptocurrency Industry Scams and Dubious NFT Project Launches | Tips For Investors And Entrepreneurs

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There are many scams in the cryptocurrency industry, such as fake ICOs that have no product and run away with your money or a business unable to deliver what was promised on their website. Be cautious when you come across any new project promising big returns overnight profits because this is an indication of scam activity.

Despite its innovative projects and dubious NFT launches, the token and Web 3.0 economy is plagued by cryptocurrency scams.

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Data suggest that billions of dollars worth of investors’ wealth has been lost to non-transparent blockchain projects across the world.

Many unsuspecting investors do not hesitate to risk their hard-earned money even in apparently dubious projects because transparency is believed to be one of the essential values behind blockchain-based crypto projects.

In non-transparent blockchain projects around the world, investors have lost billions of dollars in wealth.

The 90% of Crypto Investment Lost to Rug Pulls

Rug pulls, in which developers take investors’ money after claiming to be building a legitimate project, cost investors over $2.8 billion in 2021. In 2021, 90% of total value lost to rug pulls was associated with a centralized crypto exchange called Thodex, whose CEO disappeared after the exchange stopped allowing users to withdraw funds.

Due to the hype and ease of getting a token listed, rut pulls are more common in non-fungible tokens (NFT), memecoins and DeFi (decentralised finance). Developer teams with fake identities created the infamous Squid Game tokens. 


DeFI tokens can be made without requiring code edits if you have the right technical skills, according to Chainalysys.

On CoinMarketCap’s website, which provides statistics about cryptos, 9680 tokens are listed. Some blockchain projects focus more on marketing than on development, even in legit projects powered by blockchains. Tokens traded on crypto exchanges are referred to as “currencies.” A developer intentionally hides circulation statistics and makes things less transparent.

Sharat Chandra, Vice President, Research and Strategy at EarthID, a blockchain-based ID management platform, explains that tokens and Web 3.0 are coexisting with innovative projects and questionable token launches.

Tokens are widely used to bootstrap crypto projects, so it is crucial to analyze tokenomics when developing token based blockchain projects in order to assess the risk of token manipulation and centralization within a few wallets.”

Investments in nontransparent projects will fail in the long run. Investors should be aware of the common characteristics of these projects to avoid wasting their time and money.

Safe & Successful Crypto Trading

To catch warning signals before investing in a blockchain project, Chandra recommends performing due diligence on the team, the utility, and participating in community discord channels.

Rohas Nagpal, CEO of HyFi Blockchain, recommends evaluating blockchain projects according to the R.O.H.A.S. method, a five-point checklist.

Avoid Getting Scammed

  • Vet the revenue model from project whitepaper/ website
  • Read about team members’ credibility on LinkedIn
  • Look into algorithms & tech platforms. Check out on GitHub
  • Scan the project’s profile on Twitter, Discord, Instagram, LinkedIn and Facebook

An investor can learn more about a crypto asset’s revenue model by reading the whitepaper as well as its website. “Make sure the project has a highly-trained, respected team with long-term experience, credibility, and a positive social media presence. You can find these details from the LinkedIn profiles of the team members,” he suggests.

Look at the financial performance of the project, such as the volume of transactions, number of active users, and trading volume. Additionally, a cryptocurrency must be available on multiple credible exchanges, offer ample liquidity and have multiple trade pairs. This information can easily be obtained from sites such as CoinMarketCap and CoinGecko.

Prior to investing, it is important to consider algorithms and technology platforms. If the crypto project has been audited by reputable security auditors, you can get this information from GitHub, since most crypto projects are open source.

Lastly, be sure to check out the project’s social media profiles such as Twitter, Discord, Instagram, LinkedIn, and Facebook.

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Chris Munch

Chris Munch is a professional cryptocurrency and blockchain writer with a background in software businesses, and has been involved in marketing within the cryptocurrency space. With a passion for innovation, Chris brings a unique and insightful perspective to the world of crypto and blockchain. Chris has a deep understanding of the economic, psychological, marketing and financial forces that drive the crypto market, and has made a number of accurate calls of major shifts in market trends. He is constantly researching and studying the latest trends and technologies, ensuring that he is always up-to-date on the latest developments in the industry. Chris’ writing is characterized by his ability to explain complex concepts in a clear and concise manner, making it accessible to a wide audience of readers.