How to Spot an Exit Scam: 4 Ways to Identify a Phony ICO Don't let scammers make off with your money.

With the global cryptocurrency market now valued at over $250 billion, it's no surprise that bad actors are working to exploit such a lucrative sector of the economy. Fraudsters have stolen nearly $100 million from unsuspecting cryptocoin investors, according to reports.

Related: After Marketing 70 ICOs, I've Witnessed the Most Common Mistakes. Here They Are.

One of the most common grifts is what's known as an exit scam, a process by which sinister entrepreneurs seek investments for an exciting new cryptocurrency, only to make off with investors' funds without ever delivering an initial coin offering (ICO). Earlier this year, a Vietnamese crypto company called Modern Tech stole $660 million from roughly 32,000 people in a single exit scam.

While exit scams are no doubt a major problem the still-nascent crypto market has to contend with, there are several steps investors can take to protect themselves from falling victim to fraudsters. Here are four tips to help you identify and avoid a possible phony ICO:

1. Be wary of unrealistic promises.

In the world of investing, there's no such thing as a sure thing. One way of recognizing a possible scam early on is to take notice of when you're being offered something that sounds too good to be true.

Is someone telling you you'll get a massive return right off the bat, or guaranteeing that you'll turn a profit in the end? That's a pretty good early warning sign that things might not be legit.

Along the same lines, bad faith "token" creators will sometimes claim they've already raised millions of dollars in an attempt to make you feel like you're missing out on a golden opportunity. If this happens, ask to speak to some of the other investors.

Related: Should You Launch an ICO to Raise Money for Your Startup?

2. Vet the personnel.

You'll want to research the key people involved with the ICO. This way, you'll be able to sleep soundly with the knowledge that you're giving your money to a quality team that's capable of delivering the goods.

If an investment opportunity is valid, chances are the ICO team will include several people with cryptocurrency experience, or at least a history of working in finance and/or technology. If the ICO team is two guys who've never managed so much as a company softball team, you may want to look elsewhere.

More sophisticated scammers will fraudulently claim that their ICO is backed by trusted names in the cryptocurrency space. Double-check LinkedIn to make sure that the people who are allegedly working on the project actually list the ICO on their pages. If their profiles don't mention the currency you're about to invest in, that's a pretty big red flag.

3. Look under the hood.

Since exit scams are peddling nothing more than vaporware, ask to see the underlying software that token creators are trying to get you to invest in.

Check GitHub to see if your prospective investment opportunity is listed there, as most crypto projects should be open source. Healthy cryptocurrencies will also usually have a Telegram group where you can ask detailed questions about how the token will function. If all else fails, you can always ask the token creators to show you a prototype.

Related: 5 Signs an Initial Coin Offering Is a Scam

4. Make sure they're following best practices with your money.

Even if everything else seems legitimate, it's crucial to ensure that token creators are handling your investment funds properly.

One major red flag is if your ICO contributions are being sent directly to a trading exchange account on a site like Binance, which lets token creators automatically cash out any funds you've deposited. Essentially, this empowers token creators to take off with your money without any accountability for how your funds are used.

Another thing to watch for is how thoroughly the ICO company vets the money you're investing. Token creators should be following Anti-Money Laundering (AML) procedures to ensure that they're not receiving your money illegally. In addition, you'll also want to make sure that the company requires you to provide identification that allows them to comply with Know Your Customer (KYC) laws.

If the token creators are not following these best practices, then they are not in compliance with the law, and if they're not in compliance with the law, you shouldn't be giving them your money.

While scammers will always exist wherever there's money to be made, this shouldn't deter you from participating in the cryptocurrency market. By taking some precautions, you'll be able to protect yourself from possible crypto fraudsters, which will help you invest with real confidence.