What is Exit Scam?
Let's find out Exit Scam meaning, definition in crypto, what is Exit Scam, and all other detailed facts.
An exit scam is a method of making projects shut down or disappear after acquiring the investor's funds. This usually happens after or during the ICO period. In other words, it is fraudulent activity by unscrupulous cryptocurrency promoters who vanish with investors’ money.
To put things into perspective, whales essentially attempt to boost the price, also advertising and promoting activities, only to dump their coins later on. It is nearly impossible to foresee such an event until it takes place, similar to a black swan event. Exit scams occur more frequently.
To fully understand the exit scam, you must be aware of the strategy. It is quite basic, starting from the project that launches a cryptocurrency platform employing a bright idea, then raises funds from investors.
It runs for a reasonable amount of time and then disappears, which leaves the investors in a tight situation.
How to Stay Safe From Exit Scams?
People tend to believe popular YouTube channels that promote particular tokens. But what they don’t know is that typically the tokens are promoted when the price has already gone up and that it is mandatory to investigate the fundamentals of the project.
It might be a poorly executed duplicate of an existing solution with no solid foundations for future expansion. So, do your homework when it comes to initiatives with significant returns. Also, speaking of crypto tokens, make sure to use tracking platforms on a regular basis to receive the most up-to-date information and construction materials.
You can also look for red flags in:
- Team Credibility
- Documentation Standards
- Extravagant Return Projections
- Heavily Promoted Offerings
- Non-Existent Working Model
These factors might help to determine whether you are safe or not.
The History of Exist Scams in the World of Crypto
In November of 2017, an escrow-related cryptocurrency startup called Confido disappeared after collecting $375,000 through its initial coin offering (ICO). In regards to that, the cryptocurrency's market cap decreased from approximately $6 million to $70,000, in a span of a week.
There was a sale of Logan Paul's NFTs, where three holders of the 3,000 NFTs that were to be sold had an opportunity to win a $400,000 Pokemon First Edition package. The NFTs first drew a lot of interest, propelling their value past $20,000.
Nonetheless, the majority of them are still available on OpenSea for around $1,000.
BitConnect Exit Scam
Bitconnect declared on January 16th, 2018, that it was closing its currency exchange and lending services due to a cease-and-desist order, filed by officials in Texas and North Carolina.
Following that, the platform was operating a Ponzi scheme that compensated customers in the form of BCC, which dropped from an all-time high of roughly $465 to less than $1 in less than a week.