Cryptocurrencies are, sadly, one of the investment sectors most besieged by all types of scams and attacks. Its relatively short lifespan, coupled with the lack of regulation, enormous popularity and the promise of considerable profits are fertile ground for dishonest agents to get hold of money that does not belong to them.
Not only through computer attacks or phishing, but there have been many companies and organizations that have deceived thousands of customers with good words and then made off with all their funds. This is what is known as a exit scamand some became very popular cryptocurrency scams, as you will see in this article.
What is an exit scam
An exit scam can be perfectly defined as “take the money and run.” These types of scams usually start with a company, organization, platform or cryptocurrency project promising wonders.
A typical exit scam script can go something like this: generally very high returns on investment, groundbreaking technology or an association with big brands are assured. The perfect environment is created for the user to think that they are investing in the new Nvidia or buying Bitcoin in 2010 and, through aggressive marketing, the designers of the fraud ensure that they receive as many funds as they can.
Then, in the blink of an eye, they disappear. The user tries to access their funds (either to sell or withdraw them) and finds that they are gone, the platform has disappeared or does not work, or they are simply worthless.
It is possible for an exit scam to combine other types of fraud. Pyramid scams (Ponzi scheme), rug pulls, pumps and dumps... the ways to flee with the money are extremely varied. Exit scams are not limited to the world of cryptocurrencies. Dark web sites and other e-commerce and crowdfunding platforms are also susceptible to hosting this type of fraud.
The most popular Exit scams
Some of the most notorious exit scams have swindled billions from their victims. In some cases, the culprits have fallen into the hands of justice, and in others, they have disappeared with many millions without being heard from again. These are some of the most famous:
BitConnect
One of the most famous cases thanks to the fact that it became an absolute meme due to a live presentation. This platform promised huge returns through the use of an investment bot.
Its cryptocurrency, BCC, grew dramatically until the platform was shut down without warning. It is estimated that the scam amounted to $2.4 billion.
SQUID
This coin took advantage of the fame of the Squid Game series without being officially affiliated with it. The token reached a value of $2,856 per unit, but the design of the smart contract did not allow it to be sold. Shortly after their ATH, the developers withdrew liquidity and disappeared completely, taking several million dollars with them.
Thodex
This Turkish exchange stopped allowing operations to its users from one day to the next, at which point its founder Faruk Özer left the country. The combined user funds were estimated at close to 2 billion, and Özer was eventually extradited to Türkiye where he was convicted of fraud.
Incognito Market
Although it was not a cryptocurrency, it is a good example that exit scams can occur on all types of platforms. Incognito Market was a page for the sale and purchase of illegal dark web items. Its owner closed the page and took nearly a million dollars from users, whom he then extorted by threatening to publish their purchase histories.
"Pump and dump" and "rug pulls"
There are other similar frauds that can be confused with exit scams. This is the case, for example, of rug pulls. While this term is sometimes used synonymously with exit scam and vice versa, technically a rug pull is a type of exit scam.
While an exit scam typically means that those in charge of a centralized platform have absconded with users' money (for example, blocking their wallets and transactions), a rug pull usually refers to DeFi (decentralized finance) environments. The method is, through some change in the smart contracts or in the code of a crypto or token, to leave the decentralized exchange without liquidity
Pump and dump are another type of fraud, similar but not exactly the same. They consist of manipulating the price of a crypto or token with the aim of making it rise enormously so that the user or users (generally the developers, although not necessarily) with the highest percentage of it sell massively, very negatively affecting the price.
The border between the three types of fraud may be blurred, but the result is the same: the user loses and a few take away millions that are not theirs. That is why, like everything in the world of cryptocurrencies, it is much more advisable to be skeptical than to easily get excited.
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