According to reports, ICO exit scams have now cost investors almost $100 million. This proves that while the crypto-industry might be maturing, but that doesn’t mean cons and scam artists will be leaving the field anytime soon.
Approximately $68 million of these stolen funds have been collected by exits scams within the first 2 weeks of August itself. The largest of these was allegedly pulled off by Chinese firm Shenzhen Puyin Blockchain Group, and raised about $60 million in 3 different ICOs, before falling under the radar of the State Market Regulatory Administration (SMRA).
In another example of such a scam, the members of the Block Broker ICO that was allegedly aiming to “completely eliminate ICO frauds” scammed several investors to take in about $3 million.
In its report on the topic, Diar’s experts explained that the established structure of the ICO models is what enables this scams to flourish. They stated:
“Unsurprisingly, the blatant exit scams continue to plague the largely unregulated ICO sector where the founders have no contractual obligation to deliver a product. After raising millions of dollars with no string attached, the founders’ incentives to actually build a valuable company are very limited.”
Diar notes that the huge amounts that have been stolen is indeed bizarre considering how easy it is to spot such scams using just a little diligence. For example, many of these scammers used copied whitepapers and fake profile pictures or celebrities who had nothing to do with the entire situation.
Nonetheless, fraudulent projects as these, and the ones that try using alternate tactics as well, continue to bring in millions of dollars from duped investors often, by using unrealistic speculations to trick them into acting unwisely.
Even legitimate projects have made the exit scamming scenario to acquire media attention. Reportedly, one such firm, Savedroid, which have managed to bring in about $50 million from an ICO and other fundings, had executed a fake exit scam in a rather disgusting stunt, that was allegedly in order to acquire interest in a new ICO advisory service that the firm was launching.