What is an exit scam?
- Author
- CRYPTO PORT Editorial
- Published
- Updated
- Reading time
- 4 min
In short
An exit scam is an operator shutting down and vanishing while still holding customer assets. The usual prelude is withdrawals slowing down or stopping, and by then it is often too late. The practical defences are not leaving assets on deposit and preferring operators that answer to a regulator.
Key points
- The operator disappears while holding customer funds
- Delayed or suspended withdrawals are the usual warning
- Do not leave everything on deposit with one company
- Check whether the operator is regulated before signing up
Definition
An exchange, yield service or project ceasing operations without returning customer assets, and becoming uncontactable.
When a service holds assets for you, the balance on screen is a bookkeeping entry; whether the assets are really there is not visible from outside. Once the operator decides not to honour withdrawals, individual users have very little leverage, and cross-border legal recovery takes years when it works at all.
The warning signs rhyme across cases: withdrawal processing times stretch out, one asset becomes unwithdrawable, maintenance windows are extended again and again, and support replies turn into boilerplate. A new high-yield promotion launching at the same time is a familiar accompaniment.
What an individual can do is avoid concentration. Keep only trading balances on an exchange and move long-term holdings to a wallet whose keys you control. Before opening an account, check whether the operator is registered and supervised in its jurisdiction. Those two habits shrink the worst case considerably.
Watch out for
- · Move long-term holdings off exchanges into a wallet whose keys you hold
- · If withdrawals start slowing or stopping, try to withdraw immediately and deposit nothing further
- · Before opening an account, confirm the operator is registered and supervised where it is based