The Ultimate List of Exit Scams & How to Spot One

Exit scams have affected many people in the cryptocurrency world. Here we list the most important ones and offer some tips on how to spot an exit scam.

21 Oct
2019
SelfKey
Identity Wallet
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Exit scams really started taking off in 2018, and they are now commonplace in the cryptocurrency world. What exactly is an exit scam? It happens when unethical cryptocurrency promoters take off with investors’ money during or after an initial coin offering (ICO). An exit scam can also occur when a cryptocurrency exchange suddenly disappears, effectively stealing any of the cryptocurrencies stored on the platform.

The reason why exit scams are so common and why they are so hard to stop is the fact that the cryptocurrency ecosystem is decentralized and largely unregulated. Here is a comprehensive lists of exit scams, and following that we also offer you some tips on how to avoid becoming a victim.

2019

June – PlusToken – $2.9 Billion

The details are still unfolding, but it may go down in history as the largest exit scam of all time. There is little information outside of Asian media sources, but it appears that PlusToken, a South Korea-based cryptocurrency exchange, was offering strangely high return on investment (ROI), starting from 8-9%. It turns out, the exchange was just a pyramid scheme and was relying on account holders to bring in new users in order to meet their ROI figures.

The exchange ran without a hitch for a year, and reportedly had over 100,000 users. Cracks were starting to show by June when investors couldn’t withdraw their money, and then the whole company disappeared with all of the funds. The authorities got involved, and six Chinese nationals were extradited from Vanuatu for their alleged involvement in the exit scam. Investigations are ongoing.

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June – Bitsane – Unknown

Bitsane was an Ireland-based cryptocurrency exchange that initially became popular for allowing exchange of Ripple (XRP). Founded in 2016, Bitsane ran successfully for a few years. By 2019, it had 246,000 users according to it’s website, and it’s daily trading value was around $7 million USD.

Problems started to arise in May when users were having trouble withdrawing their funds, but it was labelled as a technical issue. Then in June, the crypto exchange’s website disappeared along with all social media accounts, and emails linked to the company were bouncing. While the exact value of the cryptocurrency that was lost is unknown, it’s safe to say that it was a lot. Most users report having lost around $5,000 worth of cryptocurrency while some say they had up to $150,000 on the exchange.

May – Coinroom – Unknown

One of the largest cryptocurrency exchanges in Poland, Coinroom, started showing red flags in April. According to Polish media outlet Money.pl, users were sent an email in April notifying them that the exchange was shutting down. Account holders were told they had one day to withdraw their funds, or they could directly contact the exchange later to receive their money. While some users did manage to withdraw their money, others received nothing or only a part of what belonged to them.

Not long after, Coinroom stopped responding to emails, stopped answering the phone, and removed their website and social media channels. In an attempt to confront the company, users tried to enter the Coinroom offices but were denied access, and some users allegedly later filed a lawsuit against the crypto exchange. Once again, how much money was lost is unclear, but an estimated several thousand users lost amounts ranging from $79 to over $15,000.

2018

November – Pure Bit – $30 Million

This South-Korean ICO played fast and dirty. Pure Bit raised $30 million in an ICO in order to create their own cryptocurrency exchange. They raised funds over the course of two months and then completely disappeared. Within a matter of hours they had deleted their website, and stopped communicating on designated channels. A classic exit scam scenario.

October – MapleChange – 913 BTC

This one is a bit tricky, as what happened is still unclear. However, it reeks of an exit scam. MapleChange was a small, Canadian cryptocurrency exchange that began to see an uncommon spike in exchange activity starting in October. Later the same month, the exchange announced that it had been hacked and that all funds (valued at $5.7 million) had been withdrawn.

What made people suspicious was the immediate removal of the MapleChange website, social media accounts, and Discord and Telegram channels. While there are claims that a new Discord server was created for MapleChange users affected by the alleged hack, no one has reportedly been able to access it and there are no announcements of users being repaid. The lack of communication has led many to believe that there was no hack.

April – Modern Tech – $660 Million

Modern Tech was a Vietnamese company that launched two ICOs for two separate cryptocurrencies – one called Pincoin and the other iFan. Investors were told that they would receive returns of 48% each month and make their investment back within a matter of months. There was also commission offered for bringing in new investors to either cryptocurrency. It sounded too good to be true, and evidently, it was.

The problems started almost immediately as investors were unable to withdraw their funds. By the time the authorities got involved, the company had shuttered its office and completely disappeared. iFan’s website is still live as of today, but Pincoin’s has been removed.

April – Centra – $32 Million

Centra was a Miami-based company that launched an ICO in 2017 in order to create a cryptocurrency debit card. The company claimed that it had backing from both Visa and Mastercard for their project, and celebrities like Floyd Mayweather and DJ Khaled endorsed the ICO. The ICO ran successfully, raising $32 million by October 2017, but then nothing seemed to happen.

By March 2018, Centra’s bank accounts were being steadily emptied, and most of the employees were gone. In April, two of the founders were arrested and charged with fraud. As it turns out, neither Visa or Mastercard backed the company or their ICO, and that was just the beginning of the lies. The Security and Exchange Commission (SEC) halted the project, filing a complaint revealing their findings. The trial has yet to take place.

February – LoopX – $4.5 Million

LoopX was an emerging cryptocurrency startup with a goal of creating a crypto trading algorithm to make the most of investments. From the start there were red flags, as the company claimed it would give consistent and high returns to investors. LoopX managed to run a series of five successful ICOs, then suddenly went dark. The company’s website and social media channels all disappeared, leaving investors with empty pockets.

January – BitConnect – $14.5 Million

Bitconnect appeared on the cryptocurrency scene in 2016 with their ICO, and while it became one of the best performing currencies of 2017, there were many who called it a Ponzi scheme. The promised returns were suspiciously high, claiming to be up to 40%. To give you some perspective, the company’s website claimed that if you invested $1,000, it could be worth $50 million in three years. Ethereum founder Vitalik Buterin was one of the first to speak out against BitConnect, but despite concerns, people kept investing. 

The naysayers turned out to be correct when the exchange suddenly folded and users lost millions of dollars. At the time, investors were being repaid with BitConnect’s own cryptocurrency, which lost more than 90% of its value when the exchange announced it was closing. Sadly, the repercussions have been minimal; it seems that only the Indian head of BitConnect has been arrested.

How to spot an exit scam

While identifying an exit scam can be tricky, there are a few red flags to watch out for when looking to invest in an ICO or cryptocurrency exchange:

  • Poorly written white paper: If a white paper seems under-researched, badly written, has poor grammar, or is directly plagiarizing another white paper, steer clear. Reading a crypto project’s white paper is an easy way to tell how good or bad they might be.
  • Imaginary projections: Outlandish profit projections with no data to back them up is a massive warning sign. If it sounds too good to be true, then it most likely is! If there is extra “commission” for getting more people to invest, it is most likely a Ponzi scheme.
  • No team details: Even if the entire team isn’t made public, you should be able to see who the director and chief officers are. Any crypto project that is choosing to stay completely anonymous is usually doing so so that no one knows who is actually responsible for their actions. It’s also important to research the directors and chief officers of a project to see if they are actual people and have established credibility. Several of the exit scams listed above used fake photos, names, or stole the identities of other people to make themselves appear reputable.
  • No working product: While not all crypto projects will have a completed product ready for launch, they should have something to show you, even if it’s just a beta version of the final product. If everything is hypothetical, you can bet that their project is too.

All in all, it’s very important to do your research, especially when it comes to cryptocurrencies and ICOs. Due diligence is an absolute necessity when it comes to investing in the crypto scene.