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While the cryptocurrency market is certainly maturing and gaining a more professional, trustworthy field, it still has a lot of work to do to walk away from the examples that some ICOs are setting, and that example is that it's nothing more than a playground for scam artists.

According to research conducted by Diar, they found that ICO exit scams have cost investors a total of over $100 million.

As mentioned, the lions share of this money, totaling roughly $68 million, had been brought in by exit scams which all happened in the first weeks of August. The largest, according to the research, was pulled off by the China-based company, Shenzhen Puyin Blockchain Group, which brought in $60 million from its three separate Initial Coin Offerings. This was all before its activities raised suspicion from the State Market Regulatory Administration (SMRA).

One other particularly reprehensible exit scam, in particular, was conducted by the organizers of Block Broker, which began an ICO with the intention to use the funding for the development of a platform which would “completely eliminate ICO fraud.” Ironically, this too resulted in a countless number of people falling victim to fraud taking the shape of an exit scam as they made away with roughly $3 million in investment.

Unsurprisingly, Diar concludes, through their research, that the prevalence of exit scams can be attributed to the overall structure of the Initial Coin Offering model, stating that it creates a series of misaligned incentives.

“Unsurprisingly, the blatant exit scams continue to plague the largely unregulated ICO sector where the founders have no contractual obligation to deliver a product. After raising millions of dollars with no string attached, the founders’ incentives to actually build a valuable company are very limited.”

As Diar goes on to note, the amount of funds lost by individual investors in ICOs due to exit scams remains perplexing, especially considering just how easy some fraudulent ICOs are to spot if investors were to be a little bit more skeptical.

In some cases, these white papers include completely plagiarized or entirely stolen drafts from other, legitimate ICOs. One project, in particular, had the audacity to use a picture of Ryan Gosling as the profile pictures for a member of its development team,  while another used a written ‘testimonial' from Jennifer Aniston.

While these scams prove easy ones to spot at the worst of times, fake and malicious ICOs and the many scams that they coincide with, exit scams being one of them, still manage to draw in hundreds of millions of dollars from would-be investors and entrepreneurs. Often, these individuals fall victim to the feeling of FOMO (the Fear Of Missing Out), tricking them to act against their better judgement.

Even those organizations or ICOs which appear to be, or advertise themselves as upstanding and legitimate, have used a lot of the attention generated by these exist scams to benefit in some way. In recent memory, SaveDroid, a Germany-based company, pulled a false exit scam on its investors, causing a panic at the potential theft of over $50 million from their ICO and other sources.

The stunt itself was advertised as such, and was divulged to be a call to action from the cryptocurrency community and crypto-facing companies to demand better quality and establish a regulatory body to prevent these types of scams.

How effective they were in their calls to action remain to be seen, but what is certain is that ICOs remain hounded by a bad reputation that all too many are willing to capitalize on.

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