What’s a Cryptocurrency Exit Scam? How Do You Spot One?

In November 2017, an escrow-related cryptocurrency inauguration called Confido disappeared overnight after collecting $ 375,000 through its initial coin offer ( ICO ) . Following the news of the Confido die scam, the commercialize ceiling of the cryptocurrency fell from about $ 6 million to $ 70,000 within a week .

LoopX is another crypto startup whose ICO promised “ guaranteed profits every week thanks to the most advanced trade Software out there to date. ”  It abruptly shut down in February 2018 after raising $ 4.5 million from investors through a combination of Bitcoin and Ethereum .

And in 2020, the definance undertaking Yfdex.Finance ( Yfdex ) made off with $ 20 million of investors ‘ money after merely two days of promoting itself online.

Welcome to the exit victimize ; the newly shape of counterfeit now lurking in the anonymous and decentralize cryptocurrency universe. The above examples are lone a few of the many exit scams that occur every class .

Key Takeaways

  • An exit scam in the world of cryptocurrencies refers to when promoters of a cryptocurrency disappear with investors’ money during or after an initial coin offering (ICO).
  • The process involves promoters launching a new crypto platform, marketing the currency and concept, raising money from investors, possibly running the business for a short time, and then disappearing with the money and abandoning the project.
  • It is difficult to trace these scammers due to the decentralized, anonymous, and regulation-free operations of the virtual currency system.
  • There are ways, however, to spot a possible exit scam, which include red flags on team credibility, extravagant return projections, documentation standards, a non-existing working model, and heavily promoted offerings.

What Is an exit Scam ?

An die scam is a deceitful exercise by unethical cryptocurrency promoters who vanish with investors ’ money during or after an ICO .

The modus operandi is bare : promoters launch a modern cryptocurrency chopine based on a promise concept ; the ICO then raises money from versatile investors ; the clientele may or may not run for some time ; and then the promoters who had collected the ICO money vanish, leaving the investors in the lurch .

due to the decentralized, anonymous, and regulation-free operations of the virtual currentness ecosystem, it is difficult to trace scammers who dupe the investors .

red Flags

Though it is unmanageable to intelligibly identify a doubtful ICO, investors can keep the follow points in mind before making an investment decision .

1. team credibility

The biggest challenge with the virtual world is accountability and possession. Before investing your hard-earned money in ICOs that may look very bright, an investor must verify the credentials of the crypto team .

Keep in mind that you can purchase likes, tweets, and followers on the versatile social media platforms to build fudge on-line credibility. therefore, you should do a basic check on ICO promoters and on the backers of cryptocurrency projects and the kind of connections/followers they have.

Blockonomi mentions this about the LinkedIn pages of Confido teams : “ The dead giveaway was the fact that the pages of the four main scammers involved—two developers and two executives—were brand-new and had scantily any connections. ” 

2. extravagant Return Projections

Is it besides good to be true ? then it credibly is. For exemplify, BitConnect promised a steady 1 % daily reelect, which would have transformed an initial investment of $ 1,000 into a return of more than $ 50 million within 3 years. Ethereum founder Vitalik Buterin rightfully called it a Ponzi dodge .

The cryptocurrency world is a newly and complex investment arena. Like all investments, if you do n’t understand the product, the financials, or the company, then it is best to avoid endow. In January 2018, BitConnect abruptly shut down its lend and exchange services after experiencing a meteoric rise and burgeoning client foundation since its ICO in December 2016. The market ceiling of BitConnect, which exceeded $ 2.9 billion at its height in 2017, on the spur of the moment tanked to $ 17 million by March 2018.

3. software documentation Standards

The white wallpaper is a key document that details how a cryptocurrency undertaking is designed and developed, how it evolved, and how it will generate clientele. inexplicable, unclear, and ambiguously written white papers are a big crimson sag to investors about a likely exit scam .

4. Non-Existent Working Model

Does the cryptocurrency project have a bare-bones working model ? If it is a concept-only, non-existent product, then it probably wo n’t work. It is genuine that some new-age engineering may need to be designed completely from scribble, but promoters who want to raise millions of dollars should prove their project is worth investing in. To be dependable, investors should avoid doubtful offerings from apart individuals .

5. heavily Promoted Offerings

 Big promotions may be another sign of an passing victimize. It is common to see full-page ads of raw ICOs by lesser-known founders in the print media in populous nations like India. Confido besides reportedly paid bloggers to spread the word on diverse on-line forums .

While all ICO offerings with big promotions may not be dubious, an investor needs to take a cautious approach and do background checks on the claims made .

The Bottom Line

Scams and frauds are common even in the well-established centuries-old stock markets which are well-regulated. The anonymous world of cryptocurrencies adds more risk due to its non-regulated nature .

In the end, it is the investor who shoulders the duty to not get scammed out of their hard-earned money. Non-existent teams, extravagant profit projections, and ill-defined business models should be close scrutinized before making any investment .

reservoir : https://ontopwiki.com
Category : Finance

Post navigation

Leave a Comment

Trả lời

Email của bạn sẽ không được hiển thị công khai.