Exit Scam Definition in Crypto

An exit scam is when the people behind a crypto project take the money and disappear. It often happens around token sales, and many folks also use the term rug pull for this kind of walk-away.

Why it shows up in crypto

Crypto makes it easy to launch new projects fast. Fewer gatekeepers and lots of hype can attract bad actors who set up a project, raise funds, then abandon it.

How an exit scam typically unfolds

Scammers pitch a flashy idea, build buzz on social channels and with influencers, and sell tokens to early buyers. After collecting funds, they shut everything down or vanished, leaving holders with tokens that no longer have a functioning project behind them.

Variants and related terms

A common variant is the rug pull, where teams run the project briefly, then drain liquidity or otherwise disappear with the treasury.

Red flags to watch

• Anonymous founders or unverifiable bios
• Guaranteed or ultra-high returns in marketing. 
• Vague or copy-paste whitepaper, or no third-party code audit.
• No working demo or product, plus uneven token allocations.
• Heavy, paid promotion and social channels going quiet after the sale.
• No public repo or transparency about how the tech works.

Notable incidents

Confido raised about 375,000 dollars in 2017, then disappeared within days of its token sale. LoopX shut down in 2018 after raising roughly 4.5 million dollars.

The Squid Coin token rode the popularity of the TV show, then collapsed when its creators vanished, with losses reported in the multi-million range.

Detection and tracing today

Chain analysis and better tools have made it easier than before to trace some of these schemes and the wallets involved, even if recovery is not guaranteed.

Practical ways to reduce risk

Before putting in money, check for an independent audit, a real product roadmap, active development repos, and balanced tokenomics. Read the docs carefully, verify founders’ identities, and be extra cautious with projects that lean on hype or promise steady outsized returns. Watch how teams communicate over time, not just during the sale.

Regulatory considerations in the U.S.

If a token sale looks like a securities offering, issuers are generally expected to register with regulators and make filings that investors can look up. Missing registrations are a serious warning sign.

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