The different paths to service fraud

As a regular contributor in the exchanges child board, I and many other frequent members naturally approach new services with skepticism. In many cases, our suspicions prove justified, as some projects are created solely to scam users from the onset.

There are also services that manage to build a good reputation and earn the community's trust. Even then, reputation alone is not a guarantee of honesty. The tomboi scam reminded us that a service can spend months building credibility before eventually betraying its users.

This observation led to this question: Do all scam services begin with fraudulent intentions, or do some become scams over time?

This thread is intended to discuss the different paths to service fraud. Some services are designed as scams before they even launch while others begin as legitimate businesses but gradually become fraudulent due to greed, poor management or other factors. By understanding these different paths, we may become better at evaluating the risks associated with the services we choose to trust.

The different paths to service fraud:

1. Planned exit scammers:
This type of scammers are already predetermined to scam. They might be group of experienced individuals who create different scam projects and wait for victims, once they exit scam, they return under a new domain.

Their template looks thus;
-   Create or buy a professional website
-   Create an ANN thread.
-   Run signature campaigns.
-   Run free raffles
-   Respond professionally to users in their Ann thread
-   Deposit fairly acceptable escrow
-   Approve withdrawals and resolve disputes to build confidence.
-   Disappear once deposits become sufficiently large or when one big deposit way higher than the escrow amount enters.
Their reputation building is just like an investment to future theft.

Common Signs:

Reputation building is intentional and part of the scam.
They are usually operated by experienced teams.
They often steal larger amounts because of the trust they accumulated

Detection Difficulty: High
Services in this category are difficult to identify because they often behave like legitimate businesses for an extended period of time before exiting.

2. Opportunity scammers:
Services in this category start genuinely. They process transactions, interacts with the community, accept suggestions that improve their service and build reputation gradually.

Then one day they receive deposit way higher than they expected; instead of continuing business, greed takes the stage and eventually wins.

The logic will become "Why continue to make $2,000 monthly when I can disapear with $100,000

Common Signs:

They start genuinely
When greed sets in, they'll introduce unexpected KYC requirements, frequent maintenance etc
Communication reduces or becomes less transparent

Detection Difficulty: Very High
Unlike the planned scam, there might be no red flags during operations, this is why it's very difficult to detect in the early stage. But they could easily transition to a fraudulent service when there is a triger.

3. Fake services:
These aren't real exchanges, casinos or mixers. Their mission is simply to steal any available deposits. They are so fake that they are easy to detect, only fools are expected to fall for them. This type springs up daily in the exchanges board. They do not put in any efforts to look original. The creators use AI to hastily create their websites, just like they are creating many of such fake services simultaneously. They use chat bot automated messages to spam the Ann thread. They don't respond to questions of any kind.

Common Signs:

Copied website/UI from another service
Newly registered domain.
Fake testimonials and reviews.
Fake reserves or unverifiable claims about liquidity

Detection Difficulty: Very Low
These type of services usually have numerous red flags because their patience is so fake that they want to steal quickly Grin

4. Slow-rug or Selective scam services:
These services are dangerous because they operate for a long time before they can be bursted. They also have the tendency of setting confusion among community or forum members.

The reason is that they scam selective. While a few will be raising alarm for scam, others will be praising the service. This make them to maintain positive public image. Reviews don't help because you will see good reviews as much as you will see bad ones. They could even indulge in review influencing.

The scam by refusing large withdrawals;
freezing accounts under vague policy violation;
demanding excessive KYC only after a user wins big or larger deposits enter, in the case of casinos;
manipulating exchange rates etc

Common Signs:

Contradicting reviews
Contradicting terms of services or unclear policies
Small transactions are processed quickly, larger ones are selectively held

Detection Difficulty: High
I had some challenges rating this. I could easily go for "moderate" because there would definitely be red flags. But I decided to go for high because it might be difficult finding a clear case of fraud since there is divided opinion about this category of service. If you push more, they'll claim you are sent by competitors to attack them.

5. Ownership change scams:
Some services silently change hands. New owners will ride on the purchased reputation and customer base to scam.

They do this by slowly changing policies and operational procedures until they steal deposits. The new owners may initially maintain the same level of service to avoid raising suspicion until they gather enough profits and have big deposits that is scam worthy, they'll gradually lower standards and exit scam.

Common Signs:

Common with old services with good reputation
The service reputation history will gradually deteriorate
Sudden change of key staff
New unfavourable policies will emerge

Detection Difficulty: Moderate
This depends if transfer of ownership is made public or not. But it is worthy to note that not every ownership change leads to scam. But once there is a change, be alert because their are some projects which lasted for up to a decade but ruined by the new owners

6.Others :
I didn't know what to name the services that fall under this category, so i decided to use "others".

These services might not have an initial intention to scam but after facing difficulties like;

Massive Hacks
Regulatory actions
Mismanagement or insolvency

they will choose to conceal the problems and eventually misuse customers funds

There might not be specific qualities for this, because it is like a hybrid scam model but I will rate the Detection Difficulty as High
This is because the underlying causes of scam are often hidden. Customers might continue to trust the services while they suffocate and wind up silently.

Are there other paths to fraud not captured here; kindly mention and I'll gladly include.

You made it to the end, thanks for reading through.
I made this post to help us study services, and understand if they fit in one or two categories. The crypto space is full of scam, posts like this can raise our consciousness. I wanted to make this post in the exchange child board but I discovered that mixers and casinos are not exempted here.

Before you use any services, check their reputation, if they have accessible security funds and if they are listed in some directories like;
BitList
BitMixList
KycNotList
Monerica
etc
Pay attention to the reviews.

I also use this opportunity to mention icopress, NotATether and other directories owners to consider creating a space for escrow in their platforms (even if for only this forum users). It will save the stress of registering in a foreign platforms where one will pay up to $200 in order to claim an escrow fund.

Thanks and Peace!