ICO Scams and Pyramid Schemes: How they Operate and What to Look Out For

The cryptocurrency market is without a doubt a wild west, and it is easy to lose all your investment if you don’t perform your due diligence. The rise of Bitcoin and other cryptocurrencies in the past months have given birth to a cryptocurrency craze for ICOs (initial coin offerings). This aspect of cryptocurrency is quite risky because the market in general, is loosely regulated. There have been cases of ICOs appearing on Friday and disappearing by Monday of the next week, with the little loot they are can raise. However, not all ICOs are scams (some are actually gems), but the shady crypto space is littered with dozens of fraudulent ventures. And that’s the purpose of this article – to help you understand how scam ICOs and pyramid schemes work, and how to easily spot one.

How do They Operate?

Most ICO scams and pyramid schemes operate on the same pattern. It is ironic and somewhat intriguing that people still fall for these things. The underlying principle is to feed on the greed of susceptible individuals.

Who wouldn’t jump at a promise to make $500,000 in the next 2 weeks or even 1 year by investing only $5,000 today and possibly referring others who will do same? Most people would! But the real question is where will that money come from? It’s simply a cycle, and greedy people will always fall.

Beyond the fact that most of these ICOs and schemes do not have any tangible or tested product, they preach a passive income stream and create false hype. It is extremely easy to create a scam ICO in a few simple steps.

How to Spot Scam ICOs and Pyramid Schemes

  1. Zero team leads with necessary experience or cooked up online profiles
  2. Weak or plagiarized whitepaper filled with technical jargons, often to confuse you
  3. Unrealistic or no clear roadmap; simply a promise of phenomenal gains
  4. Uncapped fundraising goals
  5. Pyramid structure with multiple tiers
  6. Poor online presence
  7. Guaranteed profits and increase in price
  8. Empty Github repositories
  9. Shady pre-mines


These are but a few pointers to ICO scams. It is still possible for an ICO to scale through all of these and still be a scam. As a rule of thumb, always ensure you carefully read and understand their whitepaper. Dig deep into the team behind the project – check their history, social media accounts (when were they created), and previous job experience. With all of these in place, you can hardly go wrong.