How Do You Spot A Cryptocurrency Exit Scam? 

The Exit Scams Explained 

After collecting $ 175,000 through its initial coin offering an escrow related cryptocurrency start-up called Confido disappeared overnight in November 2017, whereas following the news is that the Confido exit scam has the market cap of the cryptocurrency falling from about $ 6 million to $ 70,000 within a week. Therefore, with an ICO promising guaranteed profits every week thanks to the most advanced Trading Software out here to date LoopX comes as another crypto start-up that abruptly shut down in February 2018 consequently raising $ 4.5 million from investors through a combination of bitcoin and Ethereum. As the new form of forgery lurking in the anonymous and decentralized cryptocurrency world, welcome to the exit scams. 

Details Of What An Exit Scam Is

A fraudulent practice by unethical cryptocurrency promoters is an exit scam where they vanish with investors’ money during or after an ICO. As it is simple, as the modus operandi, promoters launch a new cryptocurrency platform based on a promising concept as the ICO then raises money from various investors as the business may or may not run for some time as it is then that the promoters who collected the ICO money disappear thereby leaving the investors in the lurch. Hereafter the decentralized, anonymous, as well as regulation-free operations of the virtual currency ecosystem, come to be difficult to trace scammers who dupe the investors. 

What Are The Red Flags ?

Before making an investment decision, investors can keep the following points in mind though it is difficult to identify a dubious ICO.

1. Team Credibility: 

Accountability and ownership are the biggest challenges with the virtual world as it is before investing that your hard-earned money in ICOs which may look to be promising as an investor must verify those credentials of the crypto team. To build fake online credibility keep in mind that you can purchase likes, tweets, and followers on the various social media platforms, as also you should do a basic check on ICO promoters as well as the backers of cryptocurrency projects as the kind of connections /followers they have. 
The Confido teams mention about Blockonomi in the LinkedIn pages as the dead giveaway is the fact that the pages of the four main scammers involved and thereby two developers as well as two executives were the brand new and had barely any connections. 

2. Why These Extravagant Return Projections?: 

It probably isn’t too good to be true for instance, BitConnect promised quite a steady 1% daily return having transformed and an initial investment of $ 1,000 into a return of more than $ 50 million within 3 years as it was rightly called a Ponzi scheme by the Ethereum founder VitalikButerin. Thereafter it was observed that BitConnect has abruptly shut down its lending and the exchange services in January 2018 after experiencing a meteoric rise and burgeoning client base since its ICO in December 2016 with the market cap of BitConnect exceeding $ 2.7 billion in December 2017 suddenly tanked to $ 17 million by March 2018. 

3. The Documentation Standards: 

A key document detailing how a cryptocurrency project is designed and developed is the white paper, highlighting how it evolved, and how it is sure to generate business that is incomprehensible, unclear, and ambiguously written white papers are the biggest red flag to investors about a potential exit scam. 

4. Why The Non-Existent Working Model?: 

The relevance of the question is that will the cryptocurrency project have a bare-bones working model and if it is a concept only, a non-existent product which probably won’t work is true that thereby some new-age technology is therefore indeed designed completely from scratch but as promoters want to raise millions of dollars should they prove their project is worth investing in. Investors are therefore advised to be safe, avoiding dubious offerings from obscure individuals.  

5. Those Heavily Promoted Offerings: 

Yet another sign of an exit scam is big promotions as it is common to see the full-page ads of new ICOs which are by lesser-known founders in the print media in populous nations like India, where Confido also reportedly paid bloggers spreading the word on the various online forums. An investor, therefore, needs to take a cautious approach and do the background checks of the claims made while all ICO offerings coming with big promotions may not be dubious. Subsequently, all that boils down to the simple and age-old investment advice is that in case you don’t understand the business of the company, as well as don’t trust the people behind it then don’t invest in its shares as the same goes true for the cryptocurrency projects. 

The Bottom Line

Even in the well-established centuries-old stock markets that are well regulated, scams and frauds are common as the anonymous world of cryptocurrencies adds more risk due to its non-regulated nature. Therefore, the investor has the responsibility, in the end, to not get scammed out of his/ her hard-earned money with those non-existent teams’ extravagant profit projections as well as unclear business models that should be closely scrutinized before making any investment.