While the pseudonymous and decentralised nature of cryptocurrencies has its benefits, it also attracts the interest of bad actors. This is evident from the fact that crypto scammers took a record $14 billion in 2021, a number that is expected to rise even further this year.
What’s also alarming is the number of different schemes these miscreants run — it’s almost like there’s a new one every day. Fortunately, many of these attacks depend on human error to be successful. Therefore, with the right knowledge and diligence, they can be avoided.
Exit scams are an example of such schemes. They depend on hype and oversight to dupe several investors at once, often resulting in millions of dollars in lost cryptocurrency. But, once you know how these schemes work, it is much easier to spot and avoid them.
So, what is an exit scam?
An exit scam is a fraudulent practice where bad actors promote and/or run a fake crypto outfit and then vanish once they have accumulated enough money. One common type of exit scam is the rug pull, where scammers hype a project and abandon it after filling their pockets.
Another type of exit scam is where scammers run some Ponzi scheme under the guise of a crypto exchange or investment company. They keep the scheme running until the truth is uncovered, at which point they disappear with all the investor holdings.
They may also raise funds through an ICO and jump ship with investor funds. In some cases, they may even run the project for a while,…
