Until recently when the United States Securities and Exchange Commission (SEC), announced the launch of its Cybersecurity department, which will be in charge of hunting down perpetrators of scam initial coin offerings amongst its other duties, the ICO market has been a free-for-all ecosystem.
Some weeks ago, the SEC showed it meant business when it gave an emergency order for the freezing of assets of the founders of the Plexcoin ICO, Dominic Lacroix and his company PlexCorps.
The SEC alleged that the Plexcoin team had run afoul of some of its laws by not entirely revealing the identities of people behind the Plexcoin ICO and also promising returns that are too good to be true.
The Plexcoin ICO which raised approximately $15 million had promised investors returns of 1300% in 29 days.
Scam ICO Possible Red flags
With the presence of the fully functional Cybersecurity arm of the SEC, there would be a reduction in the rate of scam ICO project shortly. However, to be on the safe sides of things at all times, the following are some guidelines to follow when investing in an ICO.
Read Between the Lines and Ask Questions
Endeavour to find out if the ICO project has a product or is developing a product whose need exists in the society. It is a dangerous practice to invest in ICOs that are all hype but no product. It’s even safer to invest in an ICO that has a working product already as compared to the ones that just have an idea backed up with a whitepaper.
Check the Credibility of its Founders.
Another fundamental measure to consider is the credibility and trustworthiness of the ICO founders. For example in the case of the Plexcoin ICO, Dominic Lacroix and his team had been banned from organizing ICOs in Canada due to crimes committed in the past. Furthermore, always take precautions regarding ICOs with anonymous team members. Although some ICO founders prefer to remain anonymous for security reasons, just like in the case of the founder of Bitcoin, Satoshi Nakamoto. Make sure to double check ICOs who do not reveal its team members.
Ensure There Is A Proper Outline Of How Funds Would Be Spent
It’s crucial to scrutinize how the ICO founders intend to spend the money realized during the ICO. Make sure the roadmap of the ICO is outlined and precise.
If It Sounds Too Good To Be True…
Well, in most cases Scam projects would promise its investors tremendous ROI’s within a short period just to attract many unsuspecting investors. Just like in the case of Plexcoin, whose founder pledged investors a 1300% profit in less than 30 days.
It is important to note that there are risks involved in all kinds of investment opportunities. Therefore it is essential always to make sure you do not invest more than you can afford to lose.