What is a Crypto Exit Scam? A Simple Explanation

February 3, 2025

6 Mins Read

Have you ever invested in a cryptocurrency project only to have it suddenly disappear overnight? If so, you might have been the victim of a cryptocurrency exit scam.

In this blog post, we will discuss a crypto exit scam, how scammers carry out these scams, and, most importantly, how to avoid becoming a victim of these fake cryptocurrency projects.

What is an Exit Scam?

An exit scam is a sort of fraud in which an individual or group establishes a fake firm or project to fool people into investing their hard-earned money. Once they have collected enough funds, they vanish all of a sudden and steal every last dime that you have invested with them.

Exit scams are widespread in the cryptocurrency market since it is simple to start a new cryptocurrency project and then disappear without a trace. Scammers often use false promises for huge gains or advanced technology to attract investors. Before investing in any cryptocurrency project, you should be aware of exit scams and carry out thorough research.

What is a Cryptocurrency Exit Scam?

A cryptocurrency exit scam is a type of fraud in which the creators of a cryptocurrency project vanish with the investors’ money after getting cash through an initial coin offering (ICO) or another method.

This is how it normally works:

Project Development: Scammers start a new cryptocurrency project, usually with a trendy website, a whitepaper, and claims of big profits or innovative technology.
Marketing and promotion: They actively market the idea to potential investors, usually through social media, online forums, and influencer endorsements.
Fundraising: Once enough interest has been developed, they will launch an ICO or another form of obtaining funds by selling tokens to investors.
The Exit: After collecting a large sum of money, the scammers quickly abandon the project, sell their tokens, and get away with the money.

What are the Biggest Crypto Exit Scam Red Flags?

Unfortunately, crypto exit scams are all too common in the cryptocurrency industry. To prevent yourself from becoming a victim of these fraudulent schemes, it is important to be aware of the red flags that often indicate a scam.

How to Spot an Exit Scam

Spotting an exit scam in cryptocurrency is challenging but not impossible. Here are some common signs to watch for:

1. Unknown or False Team

Lack of Transparency: If the project’s team remains unknown or gives just a few details about their identities and qualifications, it raises serious issues.
Not a Single Public Profile: Be careful if team members have no public online profiles or little internet presence.
Unverified Credentials: Check the claimed skills and expertise of team members using credible web sources.

2. Unrealistic or Overstated Claims

Overpromising Returns: Be careful of projects that offer amazing and unreal returns on investment.
Innovative Technology Claims: Be aware of projects that claim to have creative technology but have no valid proof or review by others.
Hype and FOMO Tactics: Scammers often use strong advertising strategies and create a sense of urgency to tempt investors into making rapid choices.

3. Poorly Developed Website and Documentation

Unprofessional Design: A badly designed website with grammatical errors and unclear branding could be a red alert.
Incomplete Whitepaper: A whitepaper that has no exact details regarding the project’s technology, roadmap, and tokenomics is a major red flag.
Missing Key Information: If important details such as the team’s experience, project roadmap, and security measures are missing, proceed with caution.

4. Suspicious Tokenomics

Unfair Token Distribution: A heavily distorted token distribution, with a large share allocated to the team or early investors, could indicate an exit fraud.
Lack of Token Utility: If the token lacks a clear use case or function, it could be a sign of a fake project.
High Fees and Taxes: High fees and taxes on token transactions, particularly if they help the project’s developers, could be cause for alarm.

Too Much Promotion: Overly intense advertising strategies and marketing on social media platforms could mean a fraudulent strategy.
Paid Influencers: Be alert to attempts that depend mainly on paid influencers to promote their tokens.
Lack of Critical Analysis: A lack of genuine discussion and critical analysis on social media platforms can indicate an organized attempt to influence public opinion.

6. Sudden Price Increases and Decline

Fake Schemes: Be careful of quick and massive rises in prices followed by rapid declines.
Huge Sales: If the project’s team or early investors sell a huge number of tokens, it may indicate a future exit scam.

What are the Top Cryptocurrency Exit Scam Examples

Here are a few notable examples of cryptocurrency exit scams:

1. PlusToken

Year: 2019

What Happened? PlusToken, a cryptocurrency wallet service based in China, guaranteed huge returns on deposits and quickly grew into one of the greatest crypto Ponzi schemes. After gaining more than $2 billion, the operators vanished, leaving millions of users without funds.

What’s the Impact? Around 200,000 Bitcoin, 800,000 Ethereum, and other coins were lost as a result of the scam.

2. OneCoin

Year: 2014-2017

What Happened? OneCoin was advertised as an important cryptocurrency, but it was simply a Ponzi scheme with no blockchain support. Ruja Ignatova founded the scam, which raised more than $4 billion globally by promising new investors huge returns.

What’s the Impact? The founder of OneCoin fled in 2017, and the scam’s collapse resulted in arrests and investigations, although much of the money has yet to be recovered.

3. BitConnect

Year: 2016-2018

What Happened? BitConnect promised rewards of up to 40% per month through a lending platform powered by its own BCC cryptocurrency. The fraud generated billions of dollars until early 2018, when officials issued multiple cease-and-desist orders, causing BitConnect to close down.

What’s the Impact? The platform’s unexpected fall resulted in major investor losses, and BitConnect has become one of the most famous cryptocurrency scams.

4. QuadrigaCX

Year: 2018

What Happened? QuadrigaCX, Canada’s largest cryptocurrency exchange, failed after its founder, Gerald Cotten, apparently passed away in 2018, taking with him the private keys to users’ funds. Over $190 million in user funds have become unavailable, raising concerns of an exit scam.

What’s the Impact? Investigations found unusual financial practices, and many people believe Cotten’s death was a fraud or the funds had been lost earlier than he died.

5. PinCoin and iFan

Year: 2018

What Happened? In Vietnam, Modern Tech launched two ICOs, Pincoin and iFan, both of which promised big rewards. After raising $660 million, the company went out of business, and the founders disappeared.

What’s the Impact? The fraud harmed more than 32,000 investors, leading Vietnamese authorities to issue a warning against investing in cryptocurrencies.

6. MT. Gox

Year: 2014

What happened? Although not an exit scam in the traditional sense, MT. Gox, one of the major cryptocurrency exchanges at the time, went offline unexpectedly in 2014 after losing 850,000 BTC. Mark Karpeles, the owner, said that it was the result of hacking.

What’s the Impact? The incident resulted in bankruptcy and years of legal action, raising concerns about the exchange’s security practices and internal controls.

7. Turkish Exchange Thodex

Year: 2021

What happened? Thodex, a Turkish exchange, suddenly stopped trading and its CEO, Faruk Fatih Özer, fled the country with an estimated $2 billion in investor assets.

What’s the Impact? This left thousands of Turkish investors without access to their funds and highlighted risk factors in uncontrolled exchanges.

Frequently Asked Questions

What is the exit strategy for cryptocurrency?

A crypto exit strategy is a plan for taking profits and decreasing losses when the asset’s price moves against the investor’s position. A stop-loss order is one of the most well-known examples of a successful cryptocurrency exit strategy.

What is one example of a cryptocurrency scam?

A fake wallet scam fools you into thinking they are using an authentic digital wallet to store your valuables. The fake wallet asks you to submit your private keys, which should never be disclosed, and scammers then use those private keys to steal your cryptocurrency holdings.

Is exit the same as selling?

The exit point is the price at which an investor wants to sell their shares. Typically, the investor closes their position by selling the asset at its exit point. However, if the investor is brief, they may buy at an exit point to close their stance.

What defines an effective exit strategy?

An exit strategy helps in the reduction of losses and the maximization of returns from investments. Startup exit strategies include initial public offers (IPOs), purchases, and buyouts, but they can also involve liquidation or bankruptcy to exit an unsuccessful company.

Wrapping Up!

Crypto exit scams create a danger to cryptocurrency investors. Understanding the warning signs and taking security measures will help you avoid falling victim to these fraudulent scams. But you should always remember to always conduct careful research, check information, and be aware of claims of unrealistic profits.

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