Exit scam
An exit scam, is a
Conversely, purchasers can also perpetrate exit scams if, while secretly planning to close their business and/or abscond, they procure goods and services for which they do not intend to pay. However, these sorts of incidents are less common. Moreover, it is not uncommon for a procurer to go out of business due to insolvency they did not wish to occur. Such insolvencies are not typically considered to be criminal acts, let alone exit scams unless there is clear evidence of bad faith – e.g., if it can be proven the business avoided paying vendors even though it was solvent before closing down and/or it became insolvent as a result of embezzlement or other such behavior.[citation needed]
Individual vendors often reach a point of reputation maturity whereby they have sold sufficient product to have accumulated both significant reputation and escrowed funds, that many may choose to exit with those funds rather than compete at the higher-volume higher-priced matured product level.[4] For individual vendors, exit scams are often a viable scheme when dealing with any physical product (for which buyers must reasonably expect to wait before receiving orders, thus often granting the perpetrator a considerable grace period before the scam can no longer be plausibly denied) compared to digital, virtual and other intangible goods which buyers will generally expect to be delivered within a very short time after remitting payment.[citation needed]
Exit scams could be a tempting alternative to a non-fraudulent shutdown of illegal operations if the operation was inevitably going to shut down anyway for other reasons. If an illegal entity thrives by selling and/or facilitating the sale of illicit drugs, for example, it is at constant risk of being shut down by the authorities, whereas if the operators perform an exit scam, there are much better prospects for the perpetrators to both keep their profits and avoid eventual prosecution.[citation needed]
In illegal darknet markets, exit scams are frequently perpetrated. While the most common such schemes are perpetrated by individual vendors who receive payment for the product they have no intention of shipping, such scams have also been perpetrated both by individual procurers who obtain the product which they have no intention of paying for and by operators and/or administrators of these markets who, by shutting down an entire market, can abscond with whatever currency the market was holding on behalf of buyers and/or sellers in escrow at the time of the shutdown. Regardless of who is perpetrating the scam, if the cheated parties are themselves knowingly participating in illegal activities, it is not usually a viable option to notify law enforcement.[2]
The best-known examples are
Examples
In 2016, the darknet market (online black market) Evolution was previously cited as the biggest exit scam yet, where the administrators apparently made off with $12 million in bitcoin, which was held in escrow on the marketplace.[6]
Most exit scams and Ponzi schemes involving cryptocurrencies take place in the context of initial coin offerings. For example, a report by Satis Group estimates that 80% of all ICOs that took place in 2017 were scams of this type.[7][8]
This would ultimately be surpassed by the
References
- ^ "exit scam". PCMag. Archived from the original on 2024-03-01. Retrieved 2024-03-01.
- ^ a b Christian, Jon (2015-02-04). "The 'Exit Scam' Is the Darknet's Perfect Crime". Motherboard. Archived from the original on 2017-01-06. Retrieved 2019-12-12.
- ^ "What is a Cryotpcurrency Exit Scam". The Motley Fool. 7 February 2024. Archived from the original on 1 March 2024. Retrieved 1 March 2024.
- arXiv:1703.01937. Archived from the original(PDF) on 3 February 2017. Retrieved 2 February 2017.
- ^ Cernera, F.; La Morgia, M.; Mei, A.; Sassi, F. (August 2023). "Token Spammers, Rug Pulls, and Sniper Bots: An Analysis of the Ecosystem of Tokens in Ethereum and in the Binance Smart Chain (BNB}" (PDF). 32nd USENIX Security Symposium (USENIX Security 23).
- ^ Stone, Jeff (2015-03-23). "Evolution Downfall: Insider 'Exit Scam' Blamed For Massive Drug Bazaar's Sudden Disappearance". International Business Times. Archived from the original on 2019-07-16. Retrieved 2019-12-12.
- OCLC 1287131025.)
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: CS1 maint: location missing publisher (link) CS1 maint: others (link - ^ Satis Group (2021-03-04). "Cryptoasset Market Coverage Initiation: Network Creation". p. 24. Archived from the original on 2023-02-16. Retrieved 2023-02-15.
- ^ Cimpanu, Catalin (May 2, 2019). "Law enforcement seizes dark web market after moderator leaks backend credentials". Zero Day. ZDNet. Archived from the original on July 17, 2019. Retrieved December 12, 2019.
- ^ Wozke, Martin. "Blockchain-Hero: Aktuelle News rund um Kryptowährungen". blockchain-hero.com/ (in German). Archived from the original on 2023-04-07. Retrieved 2023-04-07.
- ^ Computerworld.ch. "Kryptowährungs-Betrug ein Milliardengeschäft". Computerworld.ch (in Swiss High German). Archived from the original on 2023-04-07. Retrieved 2023-04-07.