Crypto Rug Pull Examples

If you do decide to roll the dice on investing in a high-risk project, you might not want to bet too much. As a rule of thumb, it’s never a good idea to invest more than you are okay to lose. The more risky the bet you take, the more this rule holds true. If you are new to the space, it may be best to dip your toes by buying some Bitcoin or Ether . This means that they are less volatile than cryptos that have just come to market.

The developers then wait for retail investors to use matched currencies to purchase into their new coin. Paired currencies are two currencies that have been paired together for trade purposes. One remarkable thing about liquidity pools is that they form the backbone of the present DeFi ecosystem. They are a critical component of engineered resources, yield farming, lend-borrow protocols, on-chain security, blockchain gaming and automated market maker , among other applications. Unruggable indicates that the development team did not donate a significant quantity of tokens to the project. Unruggable projects do not have the requisite large quantity of team-held tokens that may be taken in a rug pull or departure scam.

In a scheme that sounds like something out of a thriller, the team replaced their secure and audited contracts with malicious ones that enabled them to steal locked investor money. They also cleverly mimicked the name of Compound Finance, a legit DeFi interest-earning protocol, to lure their marks into investing. Once the creators of a rug pull have amassed a large amount of liquidity providers with substantial capital, they pull all the available assets out.

FrostiesUnluckily for Nguyen and Llacuna, this was right around the time the Department of Justice began paying closer attention to cases of fraud in the crypto world. Launched on January 7, 2022, Frosties was an ice-cream-themed collection of 8,888 NFTs that went to great lengths to market itself as a “cool, delectable, and unique” project. If there’s anything we’ve learned from the DOJ, most recently with its Frosties NFT bust, it’s that the Justice Department isn’t messing around. Back in February, the Justice Department announced it had appointed its first-ever crypto enforcement team director, Eun Young Choi, to head the National Cryptocurrency Enforcement Team . But even if you do your homework, there’s no guarantee of success.

In November 2021, the rug was pulled from underneath investors. The token “developers” removed liquidity and the price toppled from over $2,000 to being worth just a fraction of a cent. Soft rug pulls aren’t illegal, although they are highly unethical. SquidGame This is because the project’s operation doesn’t necessarily halt once dumped, and the coin may not have been developed with fraud in mind. As more people begin to buy the token, its value will likely jump – especially because only a select few people can sell it. Once the coin reaches a certain price point, the bad actors can sell off their tokens and make off with all of the investor’s money.

In either case, this is done to siphon all the funds from the community that bought into the project. Rug pulls have been particularly common in decentralized finance, or DeFi, projects that aim to disrupt services such as banking and insurance. NFTs, or non-fungible tokens, that provide digital ownership of art and other content, have also been involved in rug pulls.

This can take a number of forms, but the most common type of rug pull is the liquidity scam, which most commonly takes place on decentralised exchanges . These are run by consensus with numerous machines working together as one network, rather than on a centralised exchange , which is privately owned by one central party. Because the price of a cryptocurrency can shoot up to many times its original value in a matter of hours, many try the get-rich-quick approach when they invest.

The exploitation occurred during the conversion of Uranium’s protocol to version V2.1, according to the company, which was introduced this month. AnubisDAO ($60 M)The token’s creators established a discord server for the token and a Twitter account that provided regular updates before the launch. However, Özer apparently fled the country the night before the exchange was shut down, promising to refund the money when he returned to Turkey. Thodex The CEO of Thodex said that the firm had to cease trading due to cyberattacks, but that the initial deposits were secure. A perfect illustration of a limiting selling order is the Squid Token scam of 2021.