Exit Scam

Definition ∞ An exit scam occurs when project developers or operators abscond with user funds or investments, abandoning the project. This fraudulent activity is common in the cryptocurrency domain, particularly with newly launched tokens, initial coin offerings (ICOs), or decentralized finance (DeFi) protocols. Perpetrators often build initial trust and attract capital through deceptive marketing, then disappear with the collected assets, leaving investors with worthless digital holdings. The pseudonymous nature of many crypto projects can facilitate these schemes, making recovery of funds exceptionally difficult.
Context ∞ News reports frequently cover exit scams as a significant threat to investor confidence and market integrity within the digital asset sector. The lack of stringent regulatory oversight in some jurisdictions, combined with the technical complexity of blockchain transactions, often makes tracing and prosecuting those responsible a formidable task. A critical discussion point revolves around enhancing due diligence practices for investors and improving mechanisms for accountability in new crypto ventures.