An exit scam, also known as a rug pull, is a form of fraud carried out under the appearance of a legitimate business or project. It occurs when the operator suddenly disappears after collecting funds from participants. Once enough money has been gathered, the originator “pulls the rug” and absconds with the funds.

In some cases, a business may stop shipping orders while continuing to accept payments from new customers. It can take time before customers realize that orders are no longer being fulfilled. By the time the issue becomes widely recognized, the business has often already vanished with the money paid for unshipped orders. Victims typically discover the scam only after it is too late to recover their funds.

Exit scams have become increasingly common with the rise of cryptocurrency projects, largely due to the lack of regulation and the decentralized nature of the ecosystem. These factors make it easier for scammers to operate anonymously and avoid accountability.

Some of the most well-known examples involve online sellers, where buyers have no knowledge of the seller’s real identity or physical location. As a result, victims have little to no legal recourse. Payments on darknet markets are usually made using cryptocurrencies such as Bitcoin or Monero, which are irreversible and cannot be recovered through chargebacks.

By vendors

Individual vendors on online and darknet marketplaces often reach a stage known as reputation maturity, where they have completed many successful transactions and accumulated substantial positive feedback from buyers. At this point, vendors may also be holding significant amounts of cryptocurrency in escrow accounts.

Rather than continuing to operate at higher volumes—which often involves increased competition, operational complexity, and exposure to law enforcement—some vendors choose to conduct an exit scam, disappearing with the escrowed funds instead of fulfilling outstanding orders. For these vendors, exiting can be financially more attractive than maintaining a long-term presence in a mature and competitive market.

By purchasers

Purchasers can also commit exit scams, although such cases are less common. This occurs when a buyer knowingly plans to shut down their operation or disappear while continuing to obtain goods or services they do not intend to pay for.

These incidents are relatively rare because most marketplaces require purchasers to send funds upfront before vendors process and ship orders. As a result, opportunities for purchasers to conduct exit scams are limited compared to those available to vendors.

In some situations, a purchaser may go out of business due to unexpected insolvency rather than fraudulent intent. Such failures are generally not considered criminal acts or exit scams unless there is clear evidence of bad faith. Indicators of bad faith may include deliberately avoiding payment despite having sufficient funds, closing operations while still solvent, or becoming insolvent as a result of embezzlement or other fraudulent behavior.

Without proof of intentional deception, these cases are typically treated as business failures rather than exit scams.

Cryptocurrency scams

One of the earliest and most widely cited cryptocurrency-related exit scams occurred in 2016 with the darknet marketplace Evolution. The platform’s administrators abruptly shut down the site and allegedly absconded with approximately $12 million worth of Bitcoin that had been held in escrow for users. At the time, this was considered the largest exit scam involving a darknet market.

Exit scams and Ponzi-style frauds have been especially prevalent in the context of initial coin offerings (ICOs). During the rapid growth of the ICO market, many projects raised funds from investors before disappearing without delivering any functional product or service. A report by the Satis Group estimated that around 80% of ICOs launched in 2017 were scams, including exit scams and fraudulent schemes.

In 2019, the scale of darknet exit scams increased further with the Wall Street Market incident. Shortly before the marketplace was seized by law enforcement authorities, its operators allegedly carried out an exit scam, stealing approximately $14.2 million in cryptocurrency. This surpassed the Evolution case and became one of the largest known darknet exit scams to date.

Prosecuting those responsible for such crimes remains difficult due to the anonymity provided by darknet platforms and cryptocurrencies, as well as the cross-border nature of these operations. According to industry and law enforcement estimates, the total financial damage caused by cryptocurrency exit scams and related fraud schemes exceeded $4.3 billion in 2019.