ICO Scams: Biggest Scams & How to Avoid Them

ICO scams remain a problem for the crypto market. Learn how ICO scams work, including ICO exit scams, how to spot ICO scams, and the biggest ICO scams.

ICO scams involve fake crypto projects that raise funds through token sales and disappear or fail to deliver, exploiting hype, weak regulation, and investor trust.
Common scam types include exit scams, pump-and-dumps, fake teams or whitepapers, phishing sites impersonating real ICOs, and shady projects operating in legal grey zones.
Not all ICOs are scams, but red flags include anonymous teams, unrealistic returns, no working product, vague whitepapers, and unverifiable claims or partnerships.
To avoid ICO scams, look for transparency, verifiable team credentials, audited smart contracts, and real use cases, and avoid hype-driven or unregulated offerings.

What are ICOs?

ICO stands for Initial Coin Offering. It's a way for cryptocurrency projects to raise capital by selling their own token to investors, often before the platform is even built. It’s similar to an IPO (Initial Public Offering) in the stock market, but largely unregulated.

Unfortunately, the lack of regulation and oversight has turned ICOs into a fertile ground for scams.

Learn more in our guide about crypto ICOs.

What is an ICO scam?

An ICO scam is a fraudulent fundraising scheme in the crypto market.

The basic idea behind a legitimate ICO is to raise capital for a blockchain project by offering newly minted digital tokens to early investors. These tokens are usually exchanged for established coins like Bitcoin or Ethereum. In theory, investors are funding the development of an innovative platform or service, with the expectation that the token will increase in value as the project matures.

In reality, however, the people behind the project have no intention of delivering a functional product in an ICO scam. Instead, they create a slick-looking website, publish a vague or plagiarized whitepaper full of buzzwords, and use aggressive marketing to create hype.

Once they attract enough investment, they either disappear entirely (often to offshore locations) or drag the project on without any meaningful development, eventually blaming market conditions or regulatory obstacles.

Common types of ICO scams

There are many different types of ICO scams to be aware of. Some of the most common include:

1. Exit scams

Perhaps the most straightforward and devastating form of fraud, exit scams occur when the team behind an ICO collects funds and then vanishes. Investors might initially receive regular updates and reassurances, but over time, communication becomes sparse before ceasing entirely.

Example

Plexcoin, a Canadian ICO, raised over $15 million from thousands of investors by promising outsized returns, up to 1,354% profit in less than a month. In 2017, the SEC stepped in, calling it “a full-fledged cyber scam,” and froze the assets of its founder. Despite this enforcement action, much of the investors’ funds were never recovered.

Exit scams are especially common in jurisdictions with limited regulatory oversight, and the anonymous nature of blockchain transactions makes tracing the culprits difficult.

2. Pump and dump

This scheme involves artificially inflating the price of a token through deceptive promotion—often via social media, forums, or even celebrity endorsements—only for the insiders to "dump" their holdings once the price peaks, leaving ordinary investors holding worthless tokens.

These scams may not always involve the original developers. Sometimes third-party speculators will hijack a low-volume token and manipulate its market through coordinated efforts. However, in many ICOs, the founding team plays a direct role in the manipulation by holding large portions of the token supply and dumping it at the height of hype.

How it works:

The team or early investors create buzz through exaggerated claims, influencer partnerships, and fake news.
As demand and token prices rise, they quietly sell their holdings.
Once selling pressure outweighs buying demand, the price collapses.
Investors are left with massive losses, and the token often becomes illiquid or abandoned.

3. Fake teams or whitepapers

Many scam ICOs go to great lengths to appear legitimate, starting with impressive-sounding whitepapers and fabricated team profiles.

Fake teams: Scammers often copy the photos and names of real people from LinkedIn or other professional websites and list them as "team members" or "advisors." In other cases, they use stock photos and invent fictional résumés.
Fake or copied whitepapers: The whitepaper, which is supposed to outline the project’s vision, technical architecture, and roadmap, is often plagiarized from legitimate projects or padded with technical jargon that doesn’t make sense. The goal is to appear sophisticated enough that few people bother to question it.

Because many investors focus more on hype and token price potential than on technical substance, these superficial tactics can go unchecked for months, until it's too late.

4. Phishing scams

Some of the most successful ICO-related scams don’t even require building a fake project—they just impersonate a real one. In a phishing scam, attackers create duplicate versions of legitimate ICO websites or social media accounts and trick users into sending funds to a fraudulent address.

Example

During the Telegram Open Network (TON) ICO, scammers launched dozens of fake sites pretending to be part of the legitimate offering. Some even paid for Google ads to appear at the top of search results, deceiving users into thinking they were official.

These scams are quick and can drain millions in minutes, with little to no trace.

5. Regulatory grey zones

Not all ICO scams are black-and-white frauds. Some operate in a legal gray area, exploiting regulatory loopholes or vague legal jurisdictions to mislead investors without outright deception.

For instance:

A project may raise millions claiming to build a decentralized application, but spend the funds on marketing, salaries, and overhead without making any real technical progress.
Token structures may be intentionally designed to avoid classification as securities, even though they function as investment contracts.
Projects might continuously revise their whitepapers and roadmaps to avoid delivering on promises, claiming “pivoting” as part of their strategy.

These types of ICOs may never be prosecuted, but they still result in significant financial loss and reputational damage for investors.

Biggest ICO scams

Below are five of the most infamous ICO scams to date.

1. Pincoin & iFan: $660 million

Country: Vietnam
Year: 2018
Scam type: Exit scam/Ponzi scheme

Launched by a company called Modern Tech, Pincoin and iFan were promoted as two separate projects. Pincoin promised monthly returns of up to 48%, while iFan targeted social media influencers and promised a revolution in fan engagement.

Investors were initially paid in tokens rather than cash, a classic Ponzi tactic. Eventually, Modern Tech's founders disappeared with an estimated $660 million in investor funds. The company shut down its Vietnam office overnight, leaving more than 32,000 people defrauded.

This remains one of the largest ICO scams ever, in terms of investor losses.

2. Plexcoin: $15 million

Country: Canada
Year: 2017
Scam type: Exit scam

Plexcoin promised unbelievable returns of over 1,300% in under a month, which should have been an immediate red flag. It drew widespread attention and millions in funding before being shut down by the U.S. SEC in late 2017.

The SEC called Plexcoin “a full-fledged cyber scam,” and froze the assets of founder Dominic Lacroix, a repeat offender with a history of fraud. Despite enforcement, a significant portion of investor funds was never recovered.

Plexcoin became one of the first high-profile ICOs targeted by U.S. regulators, setting a precedent for future enforcement actions.

3. Centra Tech: $25 million

Country: United States
Year: 2017
Scam type: Fake team/celebrity endorsements

Centra Tech claimed it would offer crypto debit cards backed by Visa and Mastercard, allowing people to spend crypto seamlessly. The founders enlisted celebrities like Floyd Mayweather and DJ Khaled to promote the project, which raised $25 million.

However, the founders had fake résumés, invented executive bios, and had no actual partnerships with financial institutions. In 2018, the SEC filed charges, and the founders were arrested. One of them, Sohrab Sharma, was sentenced to eight years in prison.

Centra Tech is infamous for being the first celebrity-endorsed ICO scam, triggering new rules around influencer promotion of crypto assets.

4. AriseBank: $4.2 million (claimed $600M)

Country: United States
Year: 2018
Scam type: Fake bank/regulatory grey zone

AriseBank branded itself as the “first decentralized bank,” offering FDIC-insured accounts, cryptocurrency debit cards, and a suite of financial services. It claimed to have raised over $600 million during its ICO, though only about $4.2 million could be verified by regulators.

In reality, AriseBank had no licenses, no partnerships, and no infrastructure to provide banking services. The project was shut down by the SEC in early 2018, and the founders were charged with securities fraud.

AriseBank stands out for its bold lies about regulatory approval, using the term “bank” to build investor trust while operating entirely outside the legal financial system.

5. LoopX; $4.5 million

Country: Unknown
Year: 2018
Scam type: Exit Scam

LoopX emerged during the peak of the 2017–2018 ICO craze. It promised an advanced proprietary trading algorithm that would yield consistent returns.

LoopX conducted several funding rounds and raised an estimated $4.5 million in Bitcoin and Ethereum. In early February 2018, the website, social media accounts, and all online presence disappeared overnight. No product was ever delivered, and the team behind LoopX has never been identified.

Are all ICOs scams?

No, not all ICOs are scams, but many have been.

The ICO model (Initial Coin Offering) itself isn’t inherently fraudulent. It was originally a novel way to raise capital for blockchain-based projects, allowing startups to bypass traditional venture capital and open fundraising to the global public. Many legitimate projects used ICOs to launch real, useful technologies. Some examples of legitimate successful ICOs include Ethereum, Filecoin, and Polkadot.

How to tell the difference between a legitimate ICO and a scam

Legit ICOs typically:

Have transparent teams with verifiable identities.
Provide audited smart contracts and open-source code.
Have a clear use case and reason for using a token.
Offer realistic timelines and don’t promise insane returns.
Stay active post-ICO with updates and community engagement.

How to spot an ICO scam

You can generally spot an ICO scam by looking for the following red flags in a project:

Team members are anonymous, unverifiable, or using fake photos.
The whitepaper is vague, plagiarized, or full of meaningless buzzwords.
Promises of guaranteed or extremely high returns.
No working product, MVP, demo, or public code (e.g., on GitHub).
Token has no real use case beyond speculation.
Heavy reliance on influencer marketing or celebrity endorsements.
Aggressive hype on social media and Telegram groups.
Fake or misleading website URLs (phishing attempts).
The project lacks a clear legal structure, terms, or registered company info.
The roadmap is unclear, unrealistic, or constantly shifting.
No third-party audits or security reviews of the smart contract.
Overuse of urgency tactics like “limited time only” or “act fast.”
Claims of major partnerships without verifiable proof.

Don’t forget the tax bill…

Whether you have gains from a legitimate ICO project or losses from an ICO scam, Koinly can help when it comes to tax time. Learn more in our guide to crypto ICO taxes or sign up to Koinly for free to easily calculate your tax bill.