Exit scam

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An exit scam is a confidence trick where an established business (often illegal), stops shipping orders while continuing to receive payment for new orders. If the entity had a good reputation, then it can 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.[1] Customers that trusted the business don't realize that no orders are being fulfilled until the business has already disappeared.

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.[2]

Exit scams can be a tempting alternative to a non-fraudulent shutdown of illegal operations if the operation was going to shut down anyway for other reasons. If an illegal entity thrives by selling drugs, for example, it is usually not an option for the cheated buyers to notify law enforcement.[1] The examples mentioned in news articles are online sellers, where the buyer does not know the identity or physical location of the scammer, and therefore has little recourse.

Examples[edit]

The online black market Evolution is 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.[3]

References[edit]