In our previous article, we covered some of the most notorious scam in crypto history. Now, let’s take a look at 5 remarkable ICO exit scams. These are specifically ICOs that performed a clear cut exit scam soon after the ICO ended. And by exit scam, we mean that the founders/team shut down the project and ran off with their investors’ money. In fact, there are 100s of examples that we could choose from because ICO exit scams were an extremely popular tactic for scammers.

The ICOs we will dive into are -

Confido — fake team that promised to return ICO funds Oyster Pearl — lead developer printed and dumped extra coins Savedroid — fake exit scam for publicity Prodeum — the “penis” exit scam Bitcoiin — celebrity endorsement fail

Many of these can be found on our community-powered reviews site — CryptoCanary (think Yelp for crypto).

Confido

At first glance, Confido seemed like an interesting project, led by the Dutch CEO Joost. The project looked solid from the surface — they were building an escrow service for crypto payments — which could help payment providers eliminate some trust issues with crypto payments and the delivery of promised goods/services. The team was very responsive and helpful on Telegram and were able to build trust with the community. This may be why many people turned a blind eye to a few red flags that had surfaced. For example: the Linkedin profiles of the team members were fairly new and that usually is a bad sign. When asked about this, the team had responded that LinkedIn isn’t that important to have in their part of Europe (Netherlands and Germany), but that they had opened LinkedIn accounts to satisfy the best practices for team transparency. This reasoning was gladly accepted as an explanation.

The ICO had a limited whitelist which filled quickly because interest in the project was huge — partly because the hard cap was unusually small compared to other ICOs. This made investors like the project for not being a money grab AND gave them hope that there would be much upside potential because of the small cap. Another thing that drew investors’ interest was the token model — it included a dividend payout model for token holders based on transaction commissions.

The ICO quickly sold out and the token was available for trading on IDEX and Kucoin soon after. As expected, the FOMO was real and during the first few days, the price of the token went at least 20x of the ICO price. However, after the price peak seemed to have passed, the CEO suddenly came out with a message to the investors that the team encountered a legal issue for which they could not continue the project and they apologized for the mistake. The price collapsed almost instantly and soon after, the team’s social media accounts disappeared and the site went offline. Their LinkedIn names and pictures turned out to be stolen from random strangers.

Fake images for Confido’s team

Afterwards, a law firm came out with a statement that the CEO “Joost” had contacted them and that he would make the raised funds available through KuCoin and that token holders could exchange their tokens against the original ICO price for as long as the funds lasted. Of course that would not have compensated for the losses of most people who bought their tokens on exchanges. Even though investors were able to get some money back voluntarily from the scammers, it is safe to assume that the team had tokens reserved for themselves (besides the locked tokens) and that they dumped for much higher prices through exchanges. Even by giving the ICO funds back to investors, they would still end up with a good profit from this scam.

Law firm statement

From Confido, we learned that it is crucial to always to double check social media profiles for legitimacy and to find online visual presence of the individuals related to any project. This due diligence was done too late by most investors in this ICO.

Oyster Pearl (PRL)

The exit scam surrounding Oyster Pearl was quite the remarkable chain of events. Usually, an exit scam is just the team taking off with the raised money. In the case of PRL, their anonymous lead developer “Bruno” decided to utilize one of the exclusive functions he had placed in the smart contract code to print himself more tokens at will. He printed a bunch of PRL tokens, sent them to Kucoin, and sold them for other cryptocurrencies. The timing of his actions was interesting, because he executed his plan JUST before mandatory KYC procedures were going to be activated on Kucoin, which would eliminate his ability to do this anonymously afterwards.

Of course, the price of PRL tanked due to his action and the fact that everyone else tried to sell too after they discovered what had happened. Bruno’s actions took the rest of the team by surprise — they didn’t seem to be part of the heist.

However, after some time, Bruno came out on Reddit to defend himself, saying that he didn’t exit scam, but rather took action against part of the team with which he had a big disagreement. He accused them of wanting to turn PRL in a greater fool ponzi, and that it was the other team members who dumped coins on the community. He claimed that his actions were done to prevent the team from turning the project into a ponzi by dumping the printed tokens on the team instead. He said he would continue working on the PRL project diligently, but without paid team members and he denounced the existing team. You can read more details about this drama in this article.

As you can see, even the hardest evidence of an exit scam can still turn out to be debatable. But surely the project, community, and the token have suffered enormously because of this (alleged) dispute within the team.

Savedroid

Savedroid was super unique because it was the “exit scam” that actually wasn’t a scam at all. What happened? At first, the Savedroid ICO looked very legit, as it had a visible team, solid white-paper, and there didn’t seem to be any notable red flags. The ICO concluded successfully, but after that, every ICO investor’s worst nightmare happened. Suddenly, messages on Savedroid’s Twitter appeared, saying “Thanks for your money” along with pictures of tropical islands. Also, the site was pulled down and was replaced with a meme picture. It looked like a classic exit scam where the organizers ran off with the money. Of course outrage ensued and a lot of people went into panic mode, because they thought they had lost all their money.

Meme on their website as a practical joke

Fortunately, soon afterwards, the team came out and said that it was a “practical joke”, with the intention of “teaching investors a lesson” of how easy it really is to pull off an ICO exit scam. Their intentions may have been noble, but many people were still upset and thought it was a poor move to trick investors like that. Many suspected that Savedroid did this as a marketing stunt to gain a ton of free exposure (which they did). But the question is, was the damage to their reputation worth it?

One thing that investors can learn from this is that ICO exit scams are very easy to pull off by bad actors. Every ICO investor needs to be aware of that fact. But also, since it can happen even if you did a ton of due diligence for an ICO, it is a good idea to never invest more than you can afford to lose! This advice has been shared tirelessly, but rings especially true for ICOs. If an ICO exit scams, the investor should be able to shrug it off as a cost of playing the game, instead of being heavily affected. The reason why many people were so upset at Savedroid’s ploy (or actual exit scams), is that they probably had more invested than they could afford to lose!

Prodeum

The Prodeum project was another quite remarkable exit scam. This supposed startup was going to put fruits and vegetables on the Ethereum blockchain with their ERC20 token crowdsale. They aimed to track the origins of fruits and vegetables by encoding them with a tracking system. A very noble goal that attracted enough investors to raise between (estimated) $500k — $1m worth of Ether. But on a dark day in Jan 2018, investors were shocked to find out that the webpage disappeared and was replaced by a white page that only showed the text “penis”. Social media accounts were deleted as well. Needless to say, this arrogant action plus the disappearing funds was not appreciated by the crypto world.

Concise and simple message after website shutdown

It was later discovered that Prodeum had been paying people on Fiverr to post pictures of themselves with the Prodeum web domain written on their bodies as part of their promotional scheme.

Fiverr vendors writing Prodeum.io on their body

Not long after, somebody with the same identity as one of the founders of Prodeum came out with a statement that he was a victim of identity theft, that he didn’t know about this previously and wasn’t involved in any shape or form.

Fake identities and identity theft are very common strategies for shady ICOs to make a team look visible and public. This makes it so much harder for ICO investors to determine if a team is legit or not, because you would almost need to be a private investigator to make definitive assessments. Another point that ICO investors need to realize is how easy and cheap it is to get almost any kind of marketing or business service done through platforms such as Fiverr — like “post a picture of your brand written on body on social media”, but also whitepapers can be bought for around $100. This way, teams can very easily create a false narrative about the legitimacy and traction of their project.

Bitcoiin

The fact that this project just added an “i” to Bitcoin in its name should already raise huge red flags. This tactic of trying to fool noobs with a similar name is extremely shady. Furthermore, what made this exit scam remarkable was the celebrity endorsement by Steven Seagal — he regrets it enormously because of how it backfired. The project raised $75 million (claimed) from investors. Afterwards, they made a statement that the founding team and Steven Seagal would withdraw from the project to make it “fully decentralized and independent, just like Bitcoin”.

With their endorser Steven Seagal

Very clever excuse obviously, but the amount and type of development that the team delivered, did not justify at all any sum of money that has been raised by the team and that they took with them. Read some of the reviews with more details on CryptoCanary.

Celebrity endorsements of ICOs have proven to be one of the most glaring red flags of them all. Seems like every ICO that touted celebrity endorsements turned out to be a blatant scam or turned sour very quickly. Think, for example, about Centra ICO, that was backed by Floyd Mayweather or FLiK tokens backed by rapper T.I. and Kevin Hart. Even the SEC started to warn celebrities publicly that they could face charges if they endorsed scammy ICOs (or just illegal securities in general). Because of this, we won’t see many celebrity endorsements for future ICOs, but if you come across any, be extremely suspicious!

Final thoughts

This overview hopefully gave you more insights into the world of ICO exit scams. Besides the described exit scams, there have obviously been many many more in all shapes and forms, each with its own unique characteristics. But if you learned a thing or two that helps you to spot a future exit scam (before it happens), then we feel that this article was worth writing. You can also help the crypto community by reviewing projects (either shady or legit) on cryptocanary.app today! This way we can all help each other to avoid the bad apples and clean up the crypto world.