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A Comprehensive Guide on ICO Scams and How to Identify Them

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In this guide, you will learn about ICOs, scams related to ICOs, and how to identify them. So let’s get started. 

Table of Contents

  • What are ICOs?
  • Categories of ICO Scams 
  • How to Identify ICO Scams 
  • Concluding Lines 

What are ICOs?

ICO stands for Initial Coin Offerings. These are considered as ‘popular fundraising methods’ used by companies and startups. Organizations looking to raise money to create a new coin, app, or service launches an ICO as a method to raise funds. ICO is the cryptocurrency industry that is equivalent to an IPO, but the significant difference between the two is that IPO is usually for well-settled companies, whereas ICO is generally for the young and risky. Although some of the ICOs have yielded massive returns for investors, various others have turned out to be frauds. In fact, you can say that scams related to ICOs are the black sheep of the crypto-asset industry, and these sheep are pretty diverse.

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Categories of ICO Scams 

As we have understood what ICOs are, let’s explore some of its categories. 

Exit Scam 

An exit scam is a fraudulent operation organized by unethical cryptocurrency promoters who collected funds for an ICO and suddenly disappear without leaving any information to investors. In 2018, it was reported that more than $100 million in funds contributed to ICOs were stolen as an exit scam. 

Bounty Scams

When it comes to bounties, they have even made their way into the cryptocurrency ecosystem, and many ICO projects have witnessed the inclusion of the concept. Bounty scam is another common type of ICO scam. In this type, ICO fails to pay out promoters who were promised financial rewards for PR activities.

Exchange Scam

Sometimes, when developers plan to mislead investors to prefer to launch their ICO at a fake exchange, this type of scam is known as an “exchange scam.”

White Paper Plagiarism Scam

Another ICO scam is the white paper plagiarism scam, in which the scammer tries to copy the white paper of a promising ICO and then decides to launch it using a similar or different name. 

URL Scams 

Another popular method involves creating fake websites that match ICOs and instructing users to deposit coins into a compromised wallet. Naive investors that are unaware of the authentic websites are sometimes fooled due to such fake websites and lose their ICOs.

Ponzi Scheme

In the Ponzi scheme, organizers request new investors by promising to invest funds in opportunities to generate high returns with little or no risk at all. In this scheme, organizers promise high returns at a later stage just to attract more investors. Thus, rather than engaging in any legal investment activity, the deceitful actors focus on attracting new money to make promised payments to earlier investors and turn some of the invested capital for personal usage. 

How to Identify ICO Scams 

In order to get rid of Fraudulent ICOs and sketchy coins, there are many ways that can help you avoid such potential scams. A few of the ways are as follows:

Read Whitepaper 

To avoid ICO scams, go through the project’s whitepaper as it will help in gaining deeper insight about everything. Whitepaper lays out the background, goals, strategy, concerns, financial models, SWOT analysis, and the timeline for implementation for any blockchain-related project; thus, companies that don’t provide whitepapers should be avoided at all costs.

Thoroughly Understand the Team 

Before making any investments, the best protection measure is to thoroughly research the individual team members of a project. This is crucial because developers and the administrative team are the most important success factor for any ICO. Check out their profiles on social media platforms such as LinkedIn and other outlets. It is necessary to make an attempt to see how their credentials match up before deciding if the team is real. Explore whether the development team has the expertise that they believe they have or not. 

Evaluate Promises and Go With Your Gut 

Evaluating promises is a very crucial step. Before you decide to choose and go with any ICO team, evaluate their promises. If everything seems good, you can start investing, but if you feel off about an ICO, that’s probably because it is. Follow your gut and then decide whether you should invest or not.  

Moreover, checking out the GitHub repositories is another strategy to identify ICO scams.

Concluding Lines 

Due to a lack of regulation, developers can use a dozen tactics to fool investors, and therefore with the current craze, being careful and doing one’s due diligence is a must before investing in any ICO. It is advisable to invest your time, be self-aware, and do your own research before investing.

If you are interested in learning more about ICOs and start investing, you can get enrolled in Blockchain Council and become a Certified Cryptocurrency Expert/Trader.

To get instant updates about Blockchain Technology and to learn more about online Blockchain Certifications, check out Blockchain Council

A Comprehensive Guide on ICO Scams and How to Identify Them

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Tesla Reports $23 Million Impairment From Its Bitcoin Holdings

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Tesla, Elon Musk’s electric car manufacturer, released its quarterly earnings results, reporting more than $1 billion in profits for the first time since its launch.

It’s not all fun and games, though. To the delight of Elon’s crypto Twitter fans-turned-haters, Tesla’s investment in Bitcoin made it $23 million in losses after the markets crashed during the second quarter of 2021.

Oddly enough, the only mention of bitcoin appears in the “profitability” section of the report, mentioning the loss.

“Positive impacts were partially offset by growth in operating expenses including increased SBC, Model S/X ram (negative margin in Q2), additional supply chain costs, lower regulatory credit revenue, Bitcoin-related impairment of $23M and other items.”

Tesla Lost $23 Million… But Did It?

The $23 million loss might seem digestible considering Tesla invested about $1.5 Billion in Bitcoin. An almost 50% drop from its ATH could certainly trigger concern among investors, especially those who fear for a continuation of the downtrend that could accelerate upon Bitcoin’s drop below $30K.

However, this stat may be due more to the exploitation of a legal loophole than to an actual monetary loss.


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According to the US norms, accountants must record the value of their cryptocurrency investments at the time they are procured. If cryptocurrencies go up in price, nothing happens as long as the company hodl. The business only has to record the transaction in case of a sale. However, when prices go down, the company must record the decrease in its investment as an impairment charge.

Therefore, even though sales gains may be recorded, the tax incidence may be softened by the declines during the time the company hodled its tokens.This is due to the classification of cryptos as an “indefinite-lived intangible asset.”

In short, Elon haters probably don’t have much to celebrate, as it’s really all about a technicality… Although on second thought, $22 million seems like spare change for the world’s wealthiest man.

The Musk Effect

Tesla’s Bitcoin purchase was crucial to the Bitcoin price history.

After a brief exchange of tweets between Elon Musk and MicroStrategy CEO Michael Saylor, Tesla announced a massive purchase that put it on the podium of publicly traded companies with the most significant Bitcoin holdings.

As a result, the price of bitcoin skyrocketed at a frenetic pace, reaching an ATH in April 2021. At that point, Tesla had made more money with Bitcoin than it did with its entire car production.

However, another Tesla decision contributed almost decisively to killing this trend, driving bitcoin to its most significant decline since late 2017. The company’s announcement to stop taking payments in Bitcoin because of its environmental implications caused a panic in the markets that ended with a nearly 50% drop as the days passed.

However, recently Elon Musk acknowledged that Tesla could accept Bitcoin again if the network becomes environmentally friendly enough. After an online conference with the CEO of Twitter and a dose of optimistic rumors related to the possibility of Amazon accepting Bitcoin, cryptocurrencies had a significant rally today.

It seems that the “Musk Effect” is still alive after all.

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Source: https://cryptopotato.com/tesla-reports-23-million-usd-impairment-q2-2021/

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