Tokenized Fundraisings

Fraudulent token sales enable criminals to generate new illicit proceeds from unsuspecting investors through exit scams or misleading offerings. This is the primary objective for leveraging tokenized fundraisings.

This technique relies on under- or unregulated tokenized fundraising vehicles (ICOs, IDOs) as the primary vulnerability. Criminals exploit the inherent features of these offerings—such as minimal investor protections, lack of standardized disclosures, and ease of issuing tokens—to either fraudulently raise fresh illicit proceeds (via exit scams or misleading promotions) or to integrate preexisting tainted funds. Once tokens are sold, offenders can swiftly abandon the project or convert raised assets into other cryptocurrencies or fiat, allowing them to obscure the source of funds.

Criminals exploit the predominantly online and decentralized nature of tokenized fundraisings by leveraging platforms with limited or no KYC and using pseudonymous wallet addresses. This channel-based vulnerability allows for rapid cross-border fund flows, phishing attacks to steal private keys, and minimal oversight on smart contract deployments. These factors significantly complicate AML efforts and facilitate layering or exit scams.

• Aggregates publicly available information such as social media updates, domain registrations, corporate announcements, and other online data.
• Validates project documentation and team credentials by comparing them against credible sources and identifying plagiarized materials.
• Detects sudden removal or alteration of websites or social media profiles, signaling potential exit scams or fraudulent conduct.

• Includes comprehensive records of each financial transaction, capturing timestamps, amounts, counterparties, and related metadata.
• Enables detection of sudden surges in token purchases or repeated high-value transactions during fundraising.
• Assists investigators in tracing subsequent money flows from the token sale to other wallets or accounts, revealing potential layering or fraudulent activities.

• Documents a project's operational scope, revenue, expenditures, and resources.
• Compares declared project goals or developmental capacity with the funds reportedly raised, identifying potential discrepancies indicative of fraudulent fundraising.
• Highlights mismatches between stated progress and actual business viability or investment requirements.

• Stores detailed logs of user registration, wallet addresses, and transaction histories within exchange or token launch platforms.
• Provides visibility into large purchases, suspicious deposit or withdrawal patterns, and user-level behaviors for potential money laundering or fraudulent fundraising activities.

• Contains verified personal and business details, addresses, beneficial ownership data, and transactional risk profiles.
• Identifies whether participants in the token sale have undergone proper identity checks or if wallets remain unverified.
• Flags large contributions from high-risk or newly created accounts potentially linked to fraudulent fundraising or money laundering.

• Captures emails, chat messages, and social media communications, including pertinent timestamps and metadata.
• Reveals instances where private keys or wallet credentials are improperly requested under the guise of token sale requirements.
• Uncovers abrupt changes or suspicious instructions in official channels, aligning with common ICO exit scam behaviors.

• Provides detailed on-chain records, including wallet addresses, transaction timestamps, amounts, and token movements.
• Enables tracking of newly created or unverified wallets, rapid dispersal of raised funds through multiple smart contract addresses, and frequent conversions to other cryptocurrencies.
• Helps uncover layering attempts and complex fund flows designed to obscure the source of funds from tokenized fundraisings.

Apply heightened scrutiny for higher-risk token projects by verifying the identities of founding teams, cross-checking their professional history, and assessing their source of project funding. Validate whether the location, jurisdictional registrations, and stakeholder backgrounds align with the project's stated purpose and roadmap.

Require thorough identification and verification of large contributors in token sales, especially when deposits originate from newly generated or unverified wallets. Scrutinize the source of funds and ownership details for any high-value or repeated contributions to detect attempts at layering illicit capital through the offering.

Deploy automated tools to monitor incoming and outgoing transactions associated with token offerings. Establish specific risk rules, such as rapid sequential deposits from multiple new wallets or unusually large volumes of contributions in short timeframes, to highlight abnormal token sale activity that warrants further investigation.

Employ specialized blockchain analytics to trace fund flows from token sales, flagging unusual transaction sequences, such as rapid multi-wallet hops or immediate large outflows, that indicate potential layering or imminent exit scams. This involves monitoring known scam addresses, clustering suspicious wallet activity, and alerting compliance teams for further action.

Provide specialized training on identifying fraudulent token offerings, including how to spot plagiarized documents, detect newly formed or unverified sponsor entities, and interpret on-chain behavioral indicators of a potential exit scam. Emphasize correct escalation procedures if red flags arise.

Warn prospective contributors about typical red flags in token sales, such as stolen or plagiarized whitepapers, aggressive marketing with unrealistic promises, and direct requests for private keys. Encourage verifying official channels, team credentials, and code audits before investing.

Use escrow structures to hold token sale proceeds. Release funds incrementally based on verified milestones, audits, or external validations. This mitigates the likelihood of exit scams by ensuring the project must meet stated development goals before accessing significant capital.

Conduct thorough verification of token sale documentation (e.g., whitepaper), project websites, and team credentials using public data, social media checks, and domain registration information. Identify plagiarized text, fake executive profiles, or nonexistent offices, which are common indicators of fraudulent token raises.

• Criminals frequently accept stablecoins (e.g., USDT, USDC) during token sales, allowing contributors to pay with minimal price volatility.
• Once received, stablecoins can be quickly transferred across multiple wallets or converted on decentralized exchanges, making it difficult to trace the source and movement of illicit funds.

• Criminals launch alleged DeFi or DAO projects that offer governance tokens, claiming investors will gain voting rights and control over the platform.
• By collecting funds in these governance token sales and subsequently transferring or swapping the proceeds across various wallets, criminals obscure fund origins and can disappear with the raised assets (exit scam).

• Criminals create or market these tokens under the guise of providing a future product or service, then solicit funds from investors through an ICO/IDO model.
• After raising assets, they may abruptly abandon the project (exit scam) or use the token sale format to mix existing illicit capital, hiding its origin by blending tainted and legitimate contributions.

• Criminals conducting tokenized fundraisings (ICOs/IDOs) often require participants to send widely recognized cryptocurrencies (e.g., Ethereum) in exchange for newly issued tokens.
• They can quickly route these incoming crypto funds through multiple addresses or swap them for other digital assets, obscuring the true flow of funds and hindering investigators.

• Criminals can launch IDOs on decentralized platforms with limited or no KYC, raising funds from participants worldwide.
• The pseudonymous nature of DeFi protocols enables quick movement of newly raised or illicit funds across multiple wallets, complicating tracking and fostering anonymity for exit scams or layering activities.

• After a fraudulent token sale, offenders use exchanges to convert raised tokens into other cryptocurrencies or fiat, further obscuring the source of funds.
• By funneling large volumes of tokens through multiple transactions or different exchanges, they deepen the layering process and hinder investigators’ ability to trace the original criminal proceeds.

• Criminals can disguise fraudulent token offerings as standard crowdfunding campaigns, soliciting contributions from the public under false pretenses.
• Minimal oversight on certain online platforms enables them to rapidly collect investor funds, then abruptly cease operations (ICO exit scam), leaving contributors with worthless or non-existent tokens.

• Facilitate the technical creation and issuance of new tokens with minimal regulatory scrutiny, allowing scammers to quickly launch ICOs/IDOs.
• Once tokens are generated, criminals market them to investors, potentially circulating plagiarized promotional materials, then disappear with raised funds (exit scam) or insert tainted capital to layer illicit proceeds.

Cybercriminals orchestrate fraudulent or deceptive token offerings by:

• Creating and promoting ICO or IDO websites using plagiarized or misleading materials to lure investors.
• Launching phishing campaigns that trick participants into disclosing private keys or depositing funds into criminal wallets.
• Abruptly abandoning the project once enough capital is raised (exit scam) or layering funds across multiple wallets to obscure the money trail.

These activities complicate financial institutions' monitoring and due diligence efforts, as cybercriminals exploit anonymous online channels and rapid blockchain transactions to hide their identities and transaction flows.

Investors, often unaware of the scheme’s fraudulent nature, contribute legitimate funds to these token offerings, unintentionally merging clean capital with criminal proceeds. By participating in an unregulated or poorly vetted ICO/IDO, they:

• Provide criminals an avenue to convert illicit funds into ostensibly genuine contributions.
• Complicate financial institutions’ ability to distinguish legitimate investor money from proceeds of crime.

This unwitting involvement enables criminals to launder capital more effectively, as mixing licit and illicit funds rapidly obscures the true origin.

Criminals exploit virtual asset service providers in tokenized fundraisings by:

• Launching fraudulent ICOs or IDOs on platforms with limited KYC measures, thereby raising or layering illicit funds.
• Rapidly converting newly issued tokens into other cryptocurrencies or fiat through in-house exchange functions.
• Leveraging multi-jurisdictional or decentralized setups that hinder investigators' ability to trace and freeze suspect transactions.

This exploitation poses challenges for financial institutions, which must identify suspicious token sales and monitor complex wallet movements for signs of laundering activity.