Exit scam

An exit scam is a confidence trick where an established business stops shipping orders while receiving payment for new orders. If the entity had a good reputation, it could take some time before it is widely recognized that orders are not shipping, and the entity can then make off with the money paid for unshipped orders. Customers that trusted the business do not realize that orders are not being fulfilled until the business has already disappeared.

Conversely, purchasers can also perpetrate exit scams if, while secretly planning to close their business and/or abscond, they procure goods and services for which they do not intend to pay. However, these sorts of incidents are less common. Moreover, it is not uncommon for a procurer to go out of business due to insolvency they did not wish to occur. Such insolvencies are not typically considered to be criminal acts, let alone exit scams unless there is clear evidence of bad faith – e.g., if it can be proven the business avoided paying vendors even though it was solvent before closing down and/or it became insolvent as a result of embezzlement or other such behavior.

Individual vendors often reach a point of reputation maturity whereby they have sold sufficient product to have accumulated both significant reputation and escrowed funds, that many may choose to exit with those funds rather than compete at the higher-volume higher-priced matured product level. For individual vendors, exit scams are often a viable scheme when dealing with any physical product (for which buyers must reasonably expect to wait before receiving orders, thus often granting the perpetrator a considerable grace period before the scam can no longer be plausibly denied) compared to digital, virtual and other intangible goods which buyers will generally expect to be delivered within a very short time after remitting payment.

Exit scams could be a tempting alternative to a non-fraudulent shutdown of illegal operations if the operation was inevitably going to shut down anyway for other reasons. If an illegal entity thrives by selling and/or facilitating the sale of illicit drugs, for example, it is at constant risk of being shut down by the authorities, whereas if the operators perform an exit scam, there are much better prospects for the perpetrators to both keep their profits and avoid eventual prosecution.

In illegal darknet markets, exit scams are frequently perpetrated. While the most common such schemes are perpetrated by individual vendors who receive payment for the product they have no intention of shipping, such scams have also been perpetrated both by individual procurers who obtain the product which they have no intention of paying for and by operators and/or administrators of these markets who, by shutting down an entire market, can abscond with whatever currency the market was holding on behalf of buyers and/or sellers in escrow at the time of the shutdown. Regardless of who is perpetrating the scam, if the cheated parties are themselves knowingly participating in illegal activities, it is not usually a viable option to notify law enforcement. The best-known examples are online sellers where the buyer does not know the real identity or physical location of the scammer and therefore has little recourse.

Examples

The darknet market (online black market) Evolution was cited as the biggest exit scam yet as of 2016. The administrators apparently made off with $12 million in bitcoin, which was held in escrow on the marketplace. The WSM (Wall Street Market) exit scam of 2019 had $14.2 million worth of cryptocurrencies stolen, just before the site was seized by the authorities.

In 2018 Helbiz company did the ICO and raised $38m. in partnership with Skrill payment system. In 2019 they rebranded coin, renamed the company and close it , and announced IPO on NASDAQ for Helbiz Inc. Helbiz coin holders accused Helbiz of scam exit and filed a class-action suit in New York Southern District Court against Helbiz Inc, Skrill, Neteller, Salvatore Palella, Lorenzo Pellegrino and others. Helbiz deleted all connections with ICO and says that ICO was of their partner.