A cryptocurrency exchange startup Confido disappeared overnight in November 2017 after it collected $175,000 through its initial coin offering (ICO). Similarly, another crypto startup, LoopX, abruptly shut down in February 2018 after raising $4.5 million through a combination of Ethereum and Bitcoin from investors. This exchange too promised guaranteed profits. The latest name to join this bandwagon of exit scams is Pure Bit, a South Korean exchange.
A fraudulent practice carried out by unethical cryptocurrency promoters who disappear with investors’ money after or during an ICO is known as an exit scam. The modus operandi that is followed is very simple. Promoters enter the market by launching a new crypto trading platform on a promising concept. The platform then raises money from various investors during the ICO. Once they collect a substantial amount, the promoters vanish with the money collected via the ICO, leaving the investors in the lurch.
Although it is somewhat challenging to identify an ICO announced by a cryptocurrency exchange, investors need to keep certain pointers in mind, before they make an investment decision. One of the biggest challenges pertaining to the virtual world is ownership and accountability. Hence, investors must compulsorily verify the credentials of the crypto team prior to investing their hard-earned money in ICOs.
Investors must also be cautious if a certain business concept sounds too good to be true. Also, ambiguously written and unclear white papers should be a big red flag for investors to identify a potential exit scam. In case a cryptocurrency project seems to be a concept-only and non-existent product, then investors must understand that it probably won’t work. Another sign of an exit scam is big promotions. While all ICO offerings with big promotions may not be potential exit scams, an investor must adopt a cautious approach and carry out background checks of the claims being made, as reported on Investopedia.
In the case of Pure Bit cryptocurrency exchange, the firm’s Facebook page has suddenly disappeared. Not only that, but most of its other public-facing contact options has also vanished. The Pure Bit ICO seemed quite similar to other crypto exchanges that been have funded via the ICO model. Over 13,000 ETH was collected in this ICO, which has now suddenly disappeared, as reported on CCN.[The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views and/or the official policy of the website. ]