While funding in an ICO, it is important to receive answers to the questions which could clear up all the investment risks and to learn what a team is ready to offer for minimization of those risks.

In order not to fall victim of a scam-project, it is desirable to clarify all legal, economic and market issues of a project and to reveal an intention of a team before an investment into an ICO.

1. What is the jurisdiction of the startup and why?

Suspicious answer: “We did not create the legal entity.” The statement should guard an investor since it is not clear against what jurisdiction the legal action should be brought if the team does not fulfill the obligations.

Transparent answer: “The company A was created specifically for the project.” The team can explain the choice of the jurisdiction and submit the registration documents, information on the management structure and attributes of an office, which can be checked. It means that the team is ready to be held responsible before the law.

2. What stage of development the project is at?

Suspicious answer: “So far it is just a concept, but it’s revolutionary” or “there is a prototype, but the market is not ready for this, therefore, we raise funds for advertising". These answers tell that the project is only in an initial stage of development and extremely risky in terms of investment.

Transparent answer: "We started a working prototype, there were the first orders already, and we understand what audience the product is designed for. Besides, we have filed the patent application, and the registration is processing now, which can be checked". In this case, you understand that there is a complete demanded product and it is much more favorable for the team to use the investors' funds on its upgrade and promotion.

3. What is the team going to do if the ICO doesn’t collect the sum needed for the implementation of the project?

Suspicious answer: "Our partners or funds will give us support in this case". In addition, there is no way to check the information on the mysterious patrons, i.e. the team is not going to return the means.

Transparent answer: "We will return the means to the investors, we have an escrow agent for this case". So, the team involves a famous expert trusted by the industry. The administration of the project provided both the distribution mechanism and the refund.

4. Who is responsible for the storage and step-by-step financing of the project?

Suspicious answer: “We distribute funds ourselves and have a safe system for the means storage” — and they are going deep into the technical explanations which are abstruse to an investor and cannot be checked. The team has thought neither the mechanism of the storage nor the distribution of means over.

Transparent answer: "There are special hardware purses controlled by the escrow agent, who makes a decision on the financing of each stage of the project after the achievement of certain results" or "all the conditions are stipulated in the smart contracts". In this case, the risks of the loss are minimized.

5. Have you drafted a smart contract for the ICO? Has it undergone the testing by a side organization in regard to hacker attacks?

Suspicious answer: "We have our security experts, and we do not need any independent examinations". There is no confirmation that the contract has a cyber-attacks security system so the conditions could be changed and the means could be lost.

Transparent answer: "Yes, of course, the company A has passed the check. Here it is an expert opinion and the link to the report on Github". The independent expert evaluated the smart contract and approved it in terms of invasion protection.

6. What do you do to provide the protection against cyber-attacks and other harmful influences of the third parties?

Suspicious answer: "Our blockchain represents the protected network itself. It is impossible to make changes in the system". It means, that the team did not take care of the protection of the product.

Transparent answer: "We have the security service and the protection system". And tells about it in detail. Or, "we attract competent agencies, pay remunerations to "white hackers" for the revealed vulnerabilities". The team realizes how real the threat of cyber-attacks is, and has taken the steps for protection of the project.

7. Do you have any competitors? Why is your project any better than the others?

Suspicious answer: "We have a unique project, there are no analogs to it so far". It means, that the team was not good at studying the market, or that the product will not be interesting to the consumers.

Transparent answer: “As well as any other product, we have a chapter in our documentation, which compares the project with ones of competitors’ with the detailed description of both strengths, and shortcomings”. The team evaluates its real opportunities on the modern market.

8. Do funds or other organizations invest into the project?

Suspicious answer: "Yes, they do, but we cannot disclose the information". It is unknown in this case who finances the project, and whether the payrolls companies are interested at all.

Transparent answer: "Yes, the funds A and B have invested with XX % bonuses during the presale” or “we are going to attract them, what will be reported to the other investors". It becomes clear that the project is interesting to particular companies and how ready they are to participate.

9. Have you made an audit of compliance the law and the regulators’ demands?

Suspicious answer: "Everything is lawful and transparent, and we do not need any checks” or “an audit was made by an incompetent organization". There is no confirmation that the project is not a fraudulent scheme.

Transparent answer: "Yes, the project underwent the audit by the experts of B, a company, here are the results and contacts of the specialists". In this case, there is a firm guarantee that the activity of the team will be lawful and will rise no regulators’ suspicion.

10. What status do your tokens have?

Suspicious answer: "Our tokens are utility" while at the same time, everything proves that it is security-tokens. In this case, the team does not realize the risks connected with obligations and the state regulation of the securities market.

Transparent answer: "Our tokens are utility-tokens" and then give an accurate explanation what the signs of it are. Or "we have security-tokens, and we realize all the risks, therefore we have got the approval of the regulator and all the copies of the documents".


This is just a small part of all the questions which can be asked to shed light on the intention of a team concerning investments. But even with the help of them, it is possible to look at the project in regard to the risks warning and to protect the means from scammers.