Sabrina Lupșan is a writer at CoolTechZone, a cybersecurity enthusiast, and a future penetration tester. She holds a Bachelor’s degree in Computer Science and Economics.
ICO scams have been successful in the past, as new cryptocurrencies appear on the market often.
Image source – pixabay.com
The crypto market is worth $2.48 trillion. You hear of people becoming rich overnight after making small, spontaneous investments with little to no knowledge about cryptocurrency. You feel like you are left behind and decide to invest too.
How do you do it without falling into one of the very many scams out there? How can you tell which project is legitimate and which isn’t?
In this article, I will help you understand what you should avoid when picking your ICO rollout investment and the many risks that come with it. We also go through the famous Giza Device scam that tricked people into losing a total of over $2 million.
Table of Contents
Disclaimer: The information presented is for educational and informational purposes, and it does not contain financial advice.
Whether criminals are trying exit scams, fake URLs, or white paper scams, you should be on the lookout. Do not invest money in rushed advertisements, attractive but unrealistic projects, or teams with fake social media accounts.
In this article, we will look at two popular scams that were, unfortunately, successful:
Crypto is a digital currency that can be used to pay for services and goods. Some cryptocurrencies are stronger, while others are more volatile.
Some of the most popular cryptocurrencies currently are Bitcoin, Ethereum, Cardano, Dogecoin, Stellar, Classic Ethereum, and others. According to Statista.com, the total cryptocurrency market value as of June 2021 is 965,077.65 billion dollars.
Cryptocurrency is based on public Blockchain technology. Blockchain technology is an immutable, decentralized way of storing and performing transactions on the Internet.
In this form of storage, the records, or the transactions, are stored in blocks, which are chained together by links formed by their hashes.
Blockchain is immutable because, if someone were to change one of the blocks, all the blocks after it would have to be changed, which is almost impossible to do, invalidating, therefore, the malicious attempt.
Blockchain is decentralized because the data is stored across the participating nodes, thus not having one single point of failure. In order to alter the blockchain, an attacker would have to change over 51% of the blockchain, which is computationally impossible if the difficulty is high enough.
Crypto tokens are a special kind of digital coin usually used to raise funds for cryptocurrencies. They are tradeable and fungible assets and reside on the existing blockchain rather than have their own native blockchain, like crypto coins.
An ICO, or an Initial Coin Offering, is similar to an IPO (Initial Public Offering) and is designed to help a company raise money to create a new cryptocurrency. It is a method through which funds can be obtained for a new project, usually in the cybersecurity industry.
During this process, investors may buy tokens or other shares of the company in order to help reach the required funds, which have to be met in a limited timeframe. If the requirements are not met, the investors get their money back. If the campaign is successful, the project goes on.
In this part of the process, it is the most difficult to tell if the company you're going to invest in is legitimate and won't just steal your money. Scams regarding ICOs have been recorded, and we will analyze them in the next chapter.
There are many ways in which ICO rollout scams have been performed. We will look at three common schemes because you should be aware of them in order to protect yourself. We will also look at some real-life examples.
In this type of scam, a company steals the white paper of a legitimate project in order to lure investors to trust them. Having a very strong and well-written white paper can make your project seem very valid.
Not convinced yet? Here are some examples of ICO scams that actually happened and deceived people into paying even $5,000-10,000 without ever getting back their money.
Scammers took advantage of this crypto, and, in April 2021, a message on Discord started circulating about an urgent sale of tokens for the ICO of MinaProtocol.
The message was rushing readers to purchase before the three-hour expiration date occurs. Visiting the website, the unfortunate investor would pay the desired amount without ever seeing the money again.
A Reddit user shared that they lost all of their life savings by following a group that appeared official on Telegram, which led him to a fake website.
Following MinaProtocol on Twitter, there was a clear warning in April 2021 that there is no sale via social media.
I visited the fake link advertised on that Telegram group, so you don't have to. I ended up on minaprotocol.cc, where the browser gave me an obvious warning that it is not safe. It does not run HTTPS and does not have an SSL certificate to encrypt the connection, thus making it dangerous.
A different kind of scam, coming right from the “founders” of the cryptocurrency. According to a trusted source, Giza Device owners raised $2 million for the project from their investors and then simply disappeared without a trace. We found an old version of the Giza website, which is now deleted, on the Wayback Machine.
Looking at the fake Giza website, it does look professional enough for you to trust it. This is why you should do more research underneath what is visible and check out the team's social media, get in contact with them and perform other types of research, which will be detailed in the next chapter.
Now that we found the website let's perform some OSINT. Going to the “Team” page, we can see the Giza team. The first thing I will be checking is the LinkedIn page of Marco Fike, the Chief Operating Officer of the project.
Checking out Marco Fike’s LinkedIn page, it does not have many details. The “About” section contains a mere “Hello”.
Checking out his activity, there are exactly 3 actions he took 3 years ago: he liked someone's post on LinkedIn about SaaS (Software as a Service) and promoted the Giza project twice, but he has only 3 likes on his posts and no comments.
This is a sign that the person behind the account tried building one just to look legitimate enough to successfully perform the deception.
Another thing to consider is the scammer’s apparent jobs. Even though “Marco Fike” has listed a past job at Microsoft on his LinkedIn, a trusted source confirms that this information is false, and he had never worked at Microsoft. Therefore, the scammer used a big, trusted company’s name to appear legitimate.
Furthermore, if we follow a link from the Giza website, we find a Bitcointalk forum made especially for the Giza ICO. The first thing that pops out is a poster made carelessly, with text going out of the paragraph and sloppy design.
The poster is posted by the anonymous user “Giza Device”.
Another member of the Giza team, Karinna, this time not anonymous, answers questions from the investors. We see, on the Giza page, that she is the Community Manager of the Giza device project. However, going to her LinkedIn, we find a very simple, non-professional social media page, which is not even in English.
Of course, further research should be done, but all of these red flags should be enough to back up and think twice before diving deep into such an odd project.
The next chapter will give you some advice on how to protect yourself from such deceptions and make sure you’re not losing money to fake companies.
I have made an infographic that shows the risks of ICO investors and what they should do to make sure they are putting their money into a legitimate project and not into scams. The Giza device is a well-known fake ICO rollout that tricked people into losing a total of $2 million.
Always check these good practices when you decide to invest in a new cryptocurrency.
Feel free to share the code of infographics
Considering the examples presented previously, do not be fooled by pretty websites, rushed payments, or too-good-to-be-true investment offers. Thoroughly do your research and make sure you do not hurry on any kind of investment.
As you saw, there are many, quite complex, scams out there for ICO rollouts. This is possible because the crypto market is still new, and there are not many resources to educate yourself from.
Please follow the given advice on how to protect yourself in order to make sure you don’t fall for these very appealing but ruthless deceptions.
Do share below in a comment if you have heard of such a scam or if you encountered one yourself on the Internet. If so, how did it look like?
