BEWARE: Avoid These 7 Cryptocurrency Scams Happening Right Now

More than 1,000 Cryptocurrency Projects Have Failed in 2018

Cryptocurrency seems to be all the rage right now. Several businesses dot the internet landscape promising one revolutionary blockchain-based technology or other. At the heart of it all, are virtual tokens that somehow power that economy. Despite the apparent growth in the industry, many of these projects have folded up. Some have failed due to technical incompetence of the team while others have been outright scams.

Lack of Trust in the Cryptocurrency Startup Ecosystem

At the outset of the cryptocurrency initial coin offering (ICO) trend, the narrative was one of creating an environment that made it easy for entrepreneurs to fund their ideas. Traditional venture capitalist models were described as being too tedious. Thus, it seemed easier to create a business, slap a token and sell it to the public.

Presently, the ICO volume in 2018 has more than doubled that of last year. However, it is interesting to note that more than 1,000 projects have failed in 2018. According to Coinpsy and DeadCoins, two platforms that monitor failed cryptocurrency projects, these dead startups include projects like BRIG and Titanium.

Several experts have likened the ICO bubble to the internet bubble of the 90s and 2000s. The latter saw an explosion of ecommerce firms many of whom went belly up in no time. It appears that the same trend is repeating itself in the ICO market.

Pump and Dump ICOs

Pump and dump scams remain a clear and present danger in the mostly unregulated ICO market. Many fraudulent players in the market create business models that have no viable economic merit. Then they attach a worthless token with little or no utility, pumping the value and enticing investors. Once the artificial demand is created, and the price is inflated to the desired level, the operators cash out leaving investors with worthless coins.

The ubiquity of exit scams and pump & dump schemes in the ICO ecosystem is an indictment of the fundraising philosophy of the cryptocurrency industry. A lot of these projects appear to be no different from multi-level marketing (MLM) Ponzi schemes. Clearly defined vestment schedules and iron-clad token lockup protocols might go a long way in restoring some semblance of integrity to the ICO framework.

Critics like Jordan Belfort aka the “Wolf of Wall Street” refer to ICOs as the biggest scam. Even the United States SEC has taken a more hands-on approach to combat fraudulent ICO offerings. Since late 2017, the Commission has instigated a major clampdown on ICOs with subpoenas, arrests, and indictments of principal players in the sector.

Words of Caution for Investors

Investing in an ICO is akin to gambling – there’s always the possibility that investors can lose all the money they put into the project. With the loose regulatory framework guiding the industry, fraudsters have ample room to defraud unsuspecting people. Thus, investors should only put in what they can comfortably afford to lose.

Many ICOs promise that their projects will be the next Bitcoin or Ethereum. It is important not to get taken in by such unsubstantiated claims. Plan for the best but expect the worst.

Have you or someone you know fallen victim to one of these dud crypto projects? Share your experiences with the community in the comments section below.