Decentralized finance (DeFi) promises passive income through yield farming, but many protocols are riddled with risks, including outright scams. High APYs often mask exploitable code or exit strategies, leading to massive losses. This piece explores yield farming pitfalls, educating users on safer participation while highlighting recovery avenues. 1. Luring with Unrealistic Yields Scammers launch DeFi protocols advertising yields over 1000% APY, drawing liquidity providers with token rewards. Victims deposit pairs like ETH-USDT into pools, staking LP tokens for farm tokens. These yields stem from inflationary emissions, unsustainable without constant inflows. Educatively, legitimate projects like Aave offer modest, risk-adjusted returns; anything hyperbolic warrants scrutiny. Check tokenomics on sites like DefiLlama for emission schedules and TVL authenticity. 2. Smart Contract Vulnerabilities and Exploits Many scams embed flaws in contracts, allowing devs to mint unlimited tokens or drain pools. Flash loan attacks amplify this, borrowing to manipulate prices then repaying in one transaction. Post-exploit, funds are swiftly moved: split into smaller batches, bridged to chains like Arbitrum, and swapped to stablecoins. Understanding oracles (e.g., Chainlink) helps spot manipulation-prone setups, as faulty price feeds enable arbitrage scams. 3. Impermanent Loss and Rug Pull Mechanics Yield farmers face impermanent loss from price volatility, but scammers exacerbate it by dumping farm tokens, crashing values. In rug pulls, liquidity is removed suddenly, stranding providers. Funds then undergo obfuscation: mixing via decentralized services, converting to privacy coins, or layering through multiple DEXs. Real cases from 2025 show how anonymous teams vanish, leaving code audits as a key preventive measure. 4. Laundering and Exit Strategies Cleaned assets hit CEXs for fiat, using accounts in low-regulation areas. Mules or nested wallets add layers, making tracing multifaceted. Educatively, monitoring on-chain metrics like holder distribution via tools like Nansen can flag concentration risks indicative of scams. Where Tracing Can Intervene DeFi's open ledgers enable detailed tracing, especially pre-cash-out. Interventions include smart contract freezes (if upgradable) or exchange alerts. Cryptera Chain Signals excels in DeFi scam forensics, analyzing contract interactions and fund flows to identify actionable points. Their 2026 track record includes recovering farmed assets through chain mapping and authority collaborations. Visit https://www.crypterachainsignals.com/ for DeFi recovery support, or email info@crypterachainsignals.com to initiate help. Approach DeFi with audited protocols, diversified stakes, and exit plans. Education mitigates risks, turning potential traps into opportunities.