Bitcoin, Dogecoin, and others have become household names following their incredible ascent, making millionaires overnight. At the frothy frontier of this movement are Initial Coin Offerings (ICOs).

As investors frantically searched for ways to get into the red-hot crypto market, ICOs became a funnel for both legitimate and scam enterprises to raise capital.

Inevitably, many of the fraudulent ICOs were exposed after their value cratered. Stories circulated of victims who lost their life savings or took on debt in order to buy what amounted to Monopoly Money. The negative press caused public opinion to sour, and ICOs fell out of fashion for a period.

In response, many resources have since become available for investors to check the legitimacy of an IPO, including Icocheck, Smith+Crown, and Icowatchlist.

Now, thanks to better information and a higher degree of caution among investors, the ICO market is starting to pick back up.

What is an Initial Coin Offering?

The ICO is the younger, adventurous cousin of the more traditional IPO.

The idea behind an Initial Coin Offering is straightforward: an entity offers “tokens” in exchange for funds, usually in the form of a more established currency. The tokens can be thought of as the equivalent of stocks or equity in an IPO.

Fundraising through an ICO helps crypto entities acquire the funds necessary to cover their operational costs and scale their growth.

A successful ICO can help generate buzz and drive marketing around the value proposition of a coin. Excitement around the product then drives up the value of the tokens, which increases its appeal for both investors and traders.

Recent ICO Scams

With large sums of money being exchanged within a still emerging space, it comes as no surprise that the ICO market is rife with scammers.

Before diving into the world of ICOs, it is important that every investor take the time to become familiar with common types of scams.

Perhaps the simplest and most popular scheme is the “pump and dump”. The goal of a pump and dump is to drive up the value of a coin through the frenetic purchase of tokens within a short period of time. The perpetrators will often conspire to hold their coins until an agreed-upon time and then dump their holdings all at once, leaving those bought into the craze late “holding the bag”.

Ponzi schemes have also infiltrated the ICO world with well-known examples such as BitConnect and OneCoin.

Preying on the age-old human desire to get rich quick, these operations recruit members into a multi-level marketing hierarchy. The idea is to get as many people to buy worthless coins as possible so that when the house of cards comes tumbling down, all of the real currency has been funnelled to the villains at the top.

Here are a few of the most notable scams in recent years.

Venezuela’s Petro

Ever wanted to invest in a coin controlled by a corrupt dictatorship that was created as a means to circumvent international sanctions? Then you’ll love the petro.

Venezuela has been in a state of economic crisis for over a decade, thanks to disastrous government policies and a 2014 oil price crash.

Looking to bring back foreign investment, President Maduro launched the petro ICO in February 2018. The currency was supposedly backed by the country’s oil and mineral reserves, but the actual technology behind the petro was unclear from the beginning.

Venezuela's failed Petro Initial Coin Offering ICO
Venezuelan failed Petro launch in 2018

To nobody’s surprise, the petro’s international reception has been overwhelmingly negative. Venezuela raised around $735 million US, but that investment was quickly withdrawn and the whole idea fell flat on its face.

Pincoin and iFan

In January 2018, the crypto frenzy was near its peak. That was when Pincoin entered the ICO mix.

Created by Vietnam-based Modern Tech, Pincoin raised an astounding $660 million in ten rounds of fundraising. The project boasted some trappings of legitimacy, including a professionally crafted whitepaper and a website with a detailed roadmap.

In hindsight, the first red flag would have been the promised rate of return on investment, which was billed at an outlandish 48% per month.

The second would have been the announcement that rewards would be paid out in a new currency called iFan, which had no obvious value or use.

In March, Modern tech abruptly closed up shop and fled to an undisclosed location, leaving no doubt that the whole operation was simply an “exit scam”.


When the SEC created a Cyber Unit in 2017 to combat ICO scams, the first action it took was against the PlexCorps, founder of Plexcoin.

Suspicions arose immediately around the coin, which promised a return of over $1300 on an investment of $100. Still, the project was able to bilk $15 million from investors in its ICO.

The Plexcoin case is an example of how scam perpetrators use social media as a weapon to ensnare their victims. As late as October 2018, you could find tweets advertising Plexcoin giveaways, amplified by thousands of fake accounts.


It’s not every day that you can invest in a cryptocurrency endorsed by Steven Seagal. With the famed martial arts actor in its corner, Bitcoiin2Gen (B2G) generated plenty of buzz in its early 2018 ICO. A 2018 press release announced B2G’s goal of being a “superior or more advanced version of Original Bitcoin”.

Fabricated white papers and fake websites helped give B2G the illusion of legitimacy. B2G also falsely claimed that its tokens were distributed on the Ethereum blockchain. Its founder John Demarr was eventually arrested after raising over $11 million. Seagal eventually settled with the SEC on charges that he failed to disclose payments he received for his endorsement.

ICOs that were actually legit

It’s important to remember that scams only exist in crypto because there are incredible success stories. The emergence of cryptocurrency has altered the world economy and disrupted a space that has traditionally been dominated by large banks and corporations. Below are some of the best examples of ICOs that served as launching pads for ground-breaking, innovative projects


With a market capitalization of over $450 billion as of September 2021, Ethereum ranks second only to Bitcoin. Unlike Bitcoin, however, Ethereum was first introduced to the world through an ICO.

Ethereum’s 2014 ICO raised $18 million for its founder Vitalk Buterin, notably accepting only Bitcoin in exchange for Ethereum tokens. The price of Ether stood at $0.31 on August 31, 2014. Since then, its value has risen over 1.2 million percent, and its ICO has become a model for countless other projects.

In fact, the majority of ICOs have been issued through the Ethereum blockchain itself. Ethereum was designed with open-ended smart contract protocol, which has proven to be ideal for ICOs.


The fortunate investors who snapped up a billion NXT tokens during its 2013 ICO would go on to see its value skyrocket within a year. Though it is currently trading well below its all-time high, an NXT token acquired at ICO and held to now would still be up 60,000% in value.

The company behind NXT is Jelurida, which is now at the forefront of the emerging NFT market. It’s flagship projects NXT and Ardor boast the distinction of being among the most eco-friendly in the crypto space.


The story of IOTA is a lesson in substance over flash. Developed with the mission of becoming the language in the “internet of things”, IOTA has garnered a loyal following without relying heavily on marketing or gimmicks.

While other coins fluctuate wildly in value, IOTA’s price history is relatively steady, another indicator that its holders are in it for more than a quick buck. That being said, if you had invested in IOTA during its 2015 ICO, you would have made out pretty well; the coin’s value currently up over 1 million % from its ICO price.


If you had to design the ideal currency to survive in the modern landscape, its specs might look a lot like NEO’s. Developed in 2014 with many of the features that made Ethereum successful, NEO has the added bonus of having an inside track on the Chinese market. It is designed to be centralized and regulator-friendly, both of which are crucial for adoption in China.

Industry titans Alibaba and Microsoft both backed NEO, making its ICO was one of the most highly anticipated in recent memory. Those who managed to snap up their stake in NEO during one of its two offering periods were not disappointed; from its debut at $0.03 it is up over 200,000%.

How to avoid ICO scams

Thus far, we’ve presented a tale of two extremes within the world of ICOs. Looking back, it may seem obvious which ones were bound to succeed. In the moment, however, it is not always easy to stay objective.

Here are some tips on how to determine the legitimacy of an ICO.

Do your own research

It cannot be stressed enough: don’t buy into the hype until you’ve conducted your own independent, thorough investigation into both the product and the people behind it.

The whitepaper is a good place to start – try and get a sense of whether the founders have put real thought into crafting a sensible and grounded value proposition. Red flags include overly simplistic models, poor logic, and pie-in-sky language.

Get as much information as you can about the founders. What other projects have they been involved in? Are they engaged and transparent on social media?

If you’re having trouble finding verifiable information about them, proceed with extreme caution.

Don’t invest more than you can afford to lose

The crypto space is still in its developmental stage and that a high degree of unpredictability is baked into any ICO. Even projects with the best-laid plans can fail or take years to get their footing.

Remember that fortune favors the bold, preparation is for the wise, and patience is a virtue.