7 ms·

Avoiding being scammed in ICO “pump-and-dump” schemes

45 points by mustafabisic1 9y ago

kfk 9y ago
I wonder if there is an opportunity here for an unbiased certification process that ICO founders can request. Sort of like a Morningstar rating.
- netsharc 9y ago
  "Our startup promises blockchain-based certification process for blockchain-based platforms, offering security for [insert some more bla bla here]"... Not calling Morningstar scammers, but they also have millions in revenue...
- hobofan 9y ago
  There is http://icorating.com/ http://icorating.com/ , and I know there is at least another one I can't remember the name of.
- toast0 9y ago
  Here's my unbiased certification: I hereby certify that all of these ICOs are crap. The world doesn't need another highly frothy 'currency' with no underlying value, whose only useful properties are some famous dude (or some guy on YouTube) says it's cool and you can think you'll get in early like when you missed out on Bitcoin or whatever.
  - kfk 9y ago
    What's the point of this comment? You know, this is exactly the same attitude every MBA suit has towards any new startup, until it's successful of course, then it starts praising them.
bubbabojangles 9y ago
The worst schemes are the "Oh No, we've been hacked during our ICO, stop sending those 'other people' your money!"
- mhluongo 9y ago
  The crypto space is rife with inside jobs, but I think most of the ICO hacks are real. There's not a strong incentive to run an ICO hack when you'd otherwise just get the money without much accountability.
Apreche 9y ago
How to avoid being scammed: completely ignore the world of "coins" and other nonsense.
- erikb 9y ago
  Well, you can't avoid participating in the Game of Life. https://youtu.be/XCZ4xk8Xojc?t=2m18s https://youtu.be/XCZ4xk8Xojc?t=2m18s
- deleted 9y ago
  [deleted]
- sodafountan 9y ago
  That's akin to saying in order to avoid the dot-com crash you should avoid the web in 1997.
  - kaffeemitsahne 9y ago
    Not sure what you and sibling comment are getting at. Noone is forcing you to participate in cryptocurrency ICO's, just like noone was forcing anyone to participate in dot-com stocks back in the day. In both cases it was perfectly avoidable.
    - sodafountan 9y ago
      Well obviously, but if you don't see the value of the blockchain and the technology behind it then you're on the wrong site my friend. I'm saying that it's always better to get familiar with new technology at the earliest point possible. To "Completely ignore the world of coins" would be kind of stupid and shortsighted don't you think?
      - adrianN 9y ago
        I think they meant "ignore the world of coins as investment vehicles". You can inform yourself without putting your life savings into some ICO.
FreekNortier 9y ago
This is becoming more of a problem. That's why I only stick to mining certain coins.
- erikb 9y ago
  Have you done any profitability analysis on these? When I checked in 2015 you were losing about 20 ct on each dollar you invested. To summarize the probably resulting discussion of this question: The profit is probably in doing ICOs and offering business opportunities on top of coins, not in mining the coins.
coolio222 9y ago
A pump-and-dump scheme drives the price up by promoting the commodity only to allow insiders who bought it earlier to sell when the price peeks just before the the price plunges again. You can easily see it in penny-stocks and/or OTC-stocks. The price stays flat, then peaks, then crashes to about the pre pump-and-dump price. I haven't seen such a behaviour in any of the new coins. Does anyone have an example or link to a chart?
- ceejayoz 9y ago
  My understanding of ICOs is that the insiders don't necessarily need to dump, which makes it even better for the pump-and-dump sort of scam.
- api 9y ago
  The scammy ICOs (which is most of them) aren't really pump and dumps. They're more like variations of the "big store" and other phony front investor scams. It's more like outright stock fraud. They're selling shares in something that doesn't exist and isn't going to exist.
  - snarf21 9y ago
    I think this is biggest difference. Selling things that there is no real intent to actually make the systems. The other issue is that a real company could get sued and you'd be able to track the real assets bought with the ill gotten gains. With these ICOs, I'm not sure how you track the money to even know who to sue.
erikb 9y ago
Just to provide more options to the discussion and because nobody has mentioned it: Have you considered that all ICOs are a scam of some sort? Or that you can participate in scams and still end up being a winner? To get the noodle baking about the first part: The goal of every public offering is to make more money than what the stuff you're offering is worth to you. Of course it may have more value to other people for different reasons, but the basic idea is not to get the same value or less of what it's worth to you. So to some degree an ICO always plans to take more than it gives.
- quuquuquu 9y ago
  Ehhh the definition of every successful business is one that creates more value than the sum of its parts. There has to be a consumer somewhere, and consumers usually buy something with intrinsic value (you chop down a tree, I buy the wood from you for my house.) When there is no intrinsic value being gained, this means that the company is really just a shell game, moving money around. Think poker. People are voluntarily risking money, to play a game, to get someone else's money (and some slight entertainment.) So, if a business markets itself as one that is creating value ("we do easy digital, global payments!"), but is really just moving money around ("buy our ICO, get in on the ground floor!")... then buyer be aware :)
  - erikb 9y ago
    I like your way to define it better, because it also provides an inherent way of avoiding (more, probably not all) scams. Don't buy stuff for the sole purpose of hoping for profit. Things you buy need to have intrinsic value. The least thing you have is a logical reason why someone else would buy it for more. And in that case early adopters of ICO-scams are doing it the smart(er) way. Because they buy coins for less than the offering price and can guess from marketing hype what they may get on offering day for it.
    - quuquuquu 9y ago
      Absolutely, I do agree! Buying something expressly for profit, but masquerading it as a business, that = Herbalife. Now, some people actually do drink Herbalife shakes, but usually they are doing so as a rite-of-passage to some kind of "next level of distributorship." craziness, really :)
Temasik 9y ago
And everyone think EOS.io are doing ico They are not, Dan bytemaster was around when Satoshis was active back then
shepardrtc 9y ago
Filecoin only has a whitepaper and a website, and they raised how many millions?
api 9y ago
The irony of ICOs is that the very purpose nearly forbidden by the SEC and other global regulators -- namely issuing securities of a company -- is the most natural fit. Nobody wants a domain specific currency. If I want to purchase services whether it's from a company or from some kind of decentralized amorphous protocol I want to make that purchase in fiat cash or some general purpose crypto cash like BTC or ETH. I do not want to convert cash into some domain specific currency. That's annoying and introduces complexity, breakage, and market inefficiency.
chinathrow 9y ago
A digital "growth" company is working within my vicinity and helping ICOs success. I'm really having issues with that. Regular crowd-funding mostly have rules about what you pre-buy. Regular IPOs have tight rules and regulation on how, when and to whom you may offer. I fail to see how and why we should tolerate these ICOs scams these days. A lot of people will lose a lot of money.
sodafountan 9y ago
Ah the dot-com bubble 2.0. I think it'll go down in history as the crypto-crash because that's cool to say. But seriously this is exactly what happened in the late 90's during the rise of the web. There is real value in Bitcoin, there is real value in blockchain technology. There probably isn't any value in PETCOIN or AOLCOIN if you catch my drift. Smart investors who can stomach risk can make a lot of money over the next few years before all the shit hits the fan. Gotta love irrational exuberance.
- api 9y ago
  No, this is substantially worse than the late 90s. In the late 90s there were a lot of very premature IPOs and a lot of money raised for bad ideas, but very few of them were total cranks or scams. I could in fact buy pet food on pets.com-- it just wasn't a viable business and wasn't well executed. The CueCat was a horrible business idea but CueCats actually did exist and you could in fact use them. (I used to have one! Kept it for teh lulz.) Most ICO projects are complete and utter vapor consisting of nothing more than a stock bootstrap web site and a "white paper" that could have been generated by a Markov chain model using crypto and decentralized systems buzzwords. A few have a bit of code online that doesn't work. Of those that have shipped most of them are unusable, and of those that are usable I am only aware of maybe one or two that are at all interesting. Of those none are very compelling and none are things I couldn't do without. There are literally no hits in this space. It's all junk, and most of it is outright scams. I'd be surprised if a single current generation coin ever actually delivers real ROI. It pains me to say it too. This stuff is very much in the "I want to believe" category for me. But I've gone through them and that's what I see. It's depressing. We've discussed an ICO here at ZeroTier and I've consistently come up against it. There is so much fraud here I don't want to go near it even if there might be good use cases. A lot of capital is sloshing around but I have both ethical and pragmatic problems with participating in a system so absolutely rife with fraud. I also don't particularly want to deal with SEC investigations. Cryptocurrency on the other hand is useful. We have used Bitcoin to pay overseas contributors for open source work and consulting. The function for which block chains have become most known is so far the most useful and real. The only upside is this: I find it satisfying that the scammers are gaming the "serious math/CS papers must be written in TeX" heuristic by writing their buzzword salad white papers in LaTeX. I hate lazy prejudiced heuristics like that.
debacle 9y ago
Remember when people pretended bitcoin was a currency?
Integer 9y ago
How about a modern investment project in construction industry based on blockchain technology? An ICO investment in the infrastructure of a plot of land in Russia, which will make you a 300% return. Of course, All transactions will be securely processed in Ethereum Virtual Machine and stored in a blockchain – distributed database on numerous nodes around the globe. Decentralized consensus gives Ethereum extreme levels of fault tolerance, ensures zero downtime, and makes data stored on the blockchain forever unchangeable and censorship-resistant.
WhiteOwlLion 9y ago
Who are the most recent scam coins?

45 points by mustafabisic1 9y ago

kfk 9y ago

I wonder if there is an opportunity here for an unbiased certification process that ICO founders can request. Sort of like a Morningstar rating.

netsharc 9y ago
"Our startup promises blockchain-based certification process for blockchain-based platforms, offering security for [insert some more bla bla here]"... Not calling Morningstar scammers, but they also have millions in revenue...
hobofan 9y ago
There is http://icorating.com/ http://icorating.com/ , and I know there is at least another one I can't remember the name of.
toast0 9y ago
Here's my unbiased certification: I hereby certify that all of these ICOs are crap. The world doesn't need another highly frothy 'currency' with no underlying value, whose only useful properties are some famous dude (or some guy on YouTube) says it's cool and you can think you'll get in early like when you missed out on Bitcoin or whatever.
- kfk 9y ago
  What's the point of this comment? You know, this is exactly the same attitude every MBA suit has towards any new startup, until it's successful of course, then it starts praising them.

bubbabojangles 9y ago

The worst schemes are the "Oh No, we've been hacked during our ICO, stop sending those 'other people' your money!"

mhluongo 9y ago
The crypto space is rife with inside jobs, but I think most of the ICO hacks are real. There's not a strong incentive to run an ICO hack when you'd otherwise just get the money without much accountability.

Apreche 9y ago

How to avoid being scammed: completely ignore the world of "coins" and other nonsense.

erikb 9y ago
Well, you can't avoid participating in the Game of Life. https://youtu.be/XCZ4xk8Xojc?t=2m18s https://youtu.be/XCZ4xk8Xojc?t=2m18s
deleted 9y ago
[deleted]
sodafountan 9y ago
That's akin to saying in order to avoid the dot-com crash you should avoid the web in 1997.
- kaffeemitsahne 9y ago
  Not sure what you and sibling comment are getting at. Noone is forcing you to participate in cryptocurrency ICO's, just like noone was forcing anyone to participate in dot-com stocks back in the day. In both cases it was perfectly avoidable.
  - sodafountan 9y ago
    Well obviously, but if you don't see the value of the blockchain and the technology behind it then you're on the wrong site my friend. I'm saying that it's always better to get familiar with new technology at the earliest point possible. To "Completely ignore the world of coins" would be kind of stupid and shortsighted don't you think?
    - adrianN 9y ago
      I think they meant "ignore the world of coins as investment vehicles". You can inform yourself without putting your life savings into some ICO.

FreekNortier 9y ago

This is becoming more of a problem. That's why I only stick to mining certain coins.

erikb 9y ago
Have you done any profitability analysis on these? When I checked in 2015 you were losing about 20 ct on each dollar you invested. To summarize the probably resulting discussion of this question: The profit is probably in doing ICOs and offering business opportunities on top of coins, not in mining the coins.

coolio222 9y ago

A pump-and-dump scheme drives the price up by promoting the commodity only to allow insiders who bought it earlier to sell when the price peeks just before the the price plunges again. You can easily see it in penny-stocks and/or OTC-stocks. The price stays flat, then peaks, then crashes to about the pre pump-and-dump price. I haven't seen such a behaviour in any of the new coins. Does anyone have an example or link to a chart?

ceejayoz 9y ago
My understanding of ICOs is that the insiders don't necessarily need to dump, which makes it even better for the pump-and-dump sort of scam.
api 9y ago
The scammy ICOs (which is most of them) aren't really pump and dumps. They're more like variations of the "big store" and other phony front investor scams. It's more like outright stock fraud. They're selling shares in something that doesn't exist and isn't going to exist.
- snarf21 9y ago
  I think this is biggest difference. Selling things that there is no real intent to actually make the systems. The other issue is that a real company could get sued and you'd be able to track the real assets bought with the ill gotten gains. With these ICOs, I'm not sure how you track the money to even know who to sue.

erikb 9y ago

Just to provide more options to the discussion and because nobody has mentioned it: Have you considered that all ICOs are a scam of some sort? Or that you can participate in scams and still end up being a winner? To get the noodle baking about the first part: The goal of every public offering is to make more money than what the stuff you're offering is worth to you. Of course it may have more value to other people for different reasons, but the basic idea is not to get the same value or less of what it's worth to you. So to some degree an ICO always plans to take more than it gives.

quuquuquu 9y ago
Ehhh the definition of every successful business is one that creates more value than the sum of its parts. There has to be a consumer somewhere, and consumers usually buy something with intrinsic value (you chop down a tree, I buy the wood from you for my house.) When there is no intrinsic value being gained, this means that the company is really just a shell game, moving money around. Think poker. People are voluntarily risking money, to play a game, to get someone else's money (and some slight entertainment.) So, if a business markets itself as one that is creating value ("we do easy digital, global payments!"), but is really just moving money around ("buy our ICO, get in on the ground floor!")... then buyer be aware :)
- erikb 9y ago
  I like your way to define it better, because it also provides an inherent way of avoiding (more, probably not all) scams. Don't buy stuff for the sole purpose of hoping for profit. Things you buy need to have intrinsic value. The least thing you have is a logical reason why someone else would buy it for more. And in that case early adopters of ICO-scams are doing it the smart(er) way. Because they buy coins for less than the offering price and can guess from marketing hype what they may get on offering day for it.
  - quuquuquu 9y ago
    Absolutely, I do agree! Buying something expressly for profit, but masquerading it as a business, that = Herbalife. Now, some people actually do drink Herbalife shakes, but usually they are doing so as a rite-of-passage to some kind of "next level of distributorship." craziness, really :)

Temasik 9y ago

And everyone think EOS.io are doing ico They are not, Dan bytemaster was around when Satoshis was active back then

shepardrtc 9y ago

Filecoin only has a whitepaper and a website, and they raised how many millions?

api 9y ago

The irony of ICOs is that the very purpose nearly forbidden by the SEC and other global regulators -- namely issuing securities of a company -- is the most natural fit. Nobody wants a domain specific currency. If I want to purchase services whether it's from a company or from some kind of decentralized amorphous protocol I want to make that purchase in fiat cash or some general purpose crypto cash like BTC or ETH. I do not want to convert cash into some domain specific currency. That's annoying and introduces complexity, breakage, and market inefficiency.

chinathrow 9y ago

A digital "growth" company is working within my vicinity and helping ICOs success. I'm really having issues with that. Regular crowd-funding mostly have rules about what you pre-buy. Regular IPOs have tight rules and regulation on how, when and to whom you may offer. I fail to see how and why we should tolerate these ICOs scams these days. A lot of people will lose a lot of money.

sodafountan 9y ago

Ah the dot-com bubble 2.0. I think it'll go down in history as the crypto-crash because that's cool to say. But seriously this is exactly what happened in the late 90's during the rise of the web. There is real value in Bitcoin, there is real value in blockchain technology. There probably isn't any value in PETCOIN or AOLCOIN if you catch my drift. Smart investors who can stomach risk can make a lot of money over the next few years before all the shit hits the fan. Gotta love irrational exuberance.

api 9y ago
No, this is substantially worse than the late 90s. In the late 90s there were a lot of very premature IPOs and a lot of money raised for bad ideas, but very few of them were total cranks or scams. I could in fact buy pet food on pets.com-- it just wasn't a viable business and wasn't well executed. The CueCat was a horrible business idea but CueCats actually did exist and you could in fact use them. (I used to have one! Kept it for teh lulz.) Most ICO projects are complete and utter vapor consisting of nothing more than a stock bootstrap web site and a "white paper" that could have been generated by a Markov chain model using crypto and decentralized systems buzzwords. A few have a bit of code online that doesn't work. Of those that have shipped most of them are unusable, and of those that are usable I am only aware of maybe one or two that are at all interesting. Of those none are very compelling and none are things I couldn't do without. There are literally no hits in this space. It's all junk, and most of it is outright scams. I'd be surprised if a single current generation coin ever actually delivers real ROI. It pains me to say it too. This stuff is very much in the "I want to believe" category for me. But I've gone through them and that's what I see. It's depressing. We've discussed an ICO here at ZeroTier and I've consistently come up against it. There is so much fraud here I don't want to go near it even if there might be good use cases. A lot of capital is sloshing around but I have both ethical and pragmatic problems with participating in a system so absolutely rife with fraud. I also don't particularly want to deal with SEC investigations. Cryptocurrency on the other hand is useful. We have used Bitcoin to pay overseas contributors for open source work and consulting. The function for which block chains have become most known is so far the most useful and real. The only upside is this: I find it satisfying that the scammers are gaming the "serious math/CS papers must be written in TeX" heuristic by writing their buzzword salad white papers in LaTeX. I hate lazy prejudiced heuristics like that.

debacle 9y ago

Remember when people pretended bitcoin was a currency?

Integer 9y ago

How about a modern investment project in construction industry based on blockchain technology? An ICO investment in the infrastructure of a plot of land in Russia, which will make you a 300% return. Of course, All transactions will be securely processed in Ethereum Virtual Machine and stored in a blockchain – distributed database on numerous nodes around the globe. Decentralized consensus gives Ethereum extreme levels of fault tolerance, ensures zero downtime, and makes data stored on the blockchain forever unchangeable and censorship-resistant.

WhiteOwlLion 9y ago

Who are the most recent scam coins?