Degen's Guide to Identifying Exit Scams in Crypto
I move like a hunter through DeFi’s jungle. This guide arms you with an attacker-minded lens to expose tripwires before you invest.
- Red flags to spot early
- Tokenomics traps to beware
- A practical due diligence checklist
- Safeguards for safer bets
Red flags to spot early
Exit scammers hide in opacity. Watch for anonymous teams, promises of extraordinary returns, and sudden liquidity withdrawals. Early communications may blur ownership and roadmap realism. The pattern is a tripwire: if you cannot verify who runs the project, you should doubt the promise.
Social activity can be a tell: rapid shifts in messaging, unexplained delays, or shrinking developer visibility. For broader context on abandonment risks, see warning signs of abandonment.
Tokenomics traps that cry scam
Token distribution matters. In many exit schemes, the cap table hides insiders with generous allocations, while liquidity is siphoned away at crunch moments. Verify supply, vesting schedules, and whether any tokens are minted post-launch to inflate perception.
Audits are a must. If a project avoids third-party reviews, treat it as a red flag. See CoinDesk's overview on spotting exits for external perspective, then drill into high-criticality audit findings with others to understand risk depth.
For deeper correlation on audit findings, reference high-criticality audit findings as part of your due diligence.
A practical due diligence checklist
1) Verify team identities across LinkedIn, project site biographies, and independent sources.
2) Read the whitepaper, confirm tokenomics, and ensure an external audit exists. If not, pause due diligence and reassess risk.
3) Test liquidity and on-ramp flows in a controlled manner. See on-ramp integrations for context on user experience and security concerns.
Protective safeguards for safer bets
Impose vesting and timelocks to reduce abrupt exits. Diversify across trusted projects, and maintain critical alerts for governance changes that could signal a scam in progress.
Stay skeptical and verify every claim against on-chain data and verifiable sources. For broader governance risk awareness, consider the role of governance attack vectors in DeFi protocols.
