Brian Nguyen, an investor in Hong Kong, spent $470,000 to join a "buy first, learn later" cryptocurrency project.
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| More and more scam crypto projects appear targeting investors. Photo: Cointelegraph |
Rug pull is a popular term this year, referring to a certain cryptocurrency development team abandoning a project suddenly and taking all the investors' money with them. Chainalysis reports that this scam cost investors a total of nearly 3 billion USD in 2021.
Brian Nguyen is the typical victim of rug pull. At the end of October, he spent nearly half a million USD buying the code AnubisDAO. He admits to having signed up for a buy first and research later - a common sentiment among crypto investors.
Nguyen explained on CoinTelegraph, he was intrigued when he saw AnubisDAO being heavily promoted on Twitter, as well as being endorsed by renowned expert Sisyphus. He didn't even notice that the project had no website or white paper and all the developers used nicknames.
The money he invested then disappeared. "It really hurt," Nguyen said. You're not the only one who lost money to AnubisDAO. On the Discord channel, this project raised more than 13,256 ETH, equivalent to 54 million USD, overnight before disappearing. This is considered the second biggest rug pull scam this year. The biggest case involved the Thodex exchange (Turkey), when the team behind "hugged" the entire 2 billion USD of investors and fled earlier this year.
While AnubisDAO demonstrates a large-scale "carpet pullout", similar but smaller cases of scams are happening almost daily. In early November, Bernard, a crypto investor in Shanghai, lost his savings of $28,000 by investing in Squid, the cryptocurrency based on the hit series Squid Game.
As Bernard told CNBC, he "hurriedly bought" the Squid token without thoroughly understanding the project. After buying, he learned that this token was used by the development team to use an "anti-discharge" mechanism, which is only allowed to buy and limit to sell. After rising to $2,860 per coin, the price of Squid immediately "set up a red column", falling to zero, making people like Bernard almost lose their investment.
Not only cryptocurrencies, NFT is also becoming a new environment for rug pull scams to run rampant. For example, on October 28, a group impersonating the Miss Universe organizers created NFTs about beauty, attracted investment, but then fled with all the money.
According to Chainalysis' report on crypto crime in 2021, the amount stolen this year is equivalent to more than $7.7 billion, an increase of 81% compared to 2020. Rug pull alone accounts for $2.8 billion.
“Rug pull has emerged as a scam in the DeFi ecosystem, accounting for 37% of all crypto-related losses in 2021. This is a sharp increase from just 1% in 2020,” said Kim Grauer, head of crypto-related losses. research department at Chainalysis, told Cointelegraph.
According to Grauer, rug pull will become the leading form of fraud in the field of cryptocurrency in the coming time. According to her, the ease of creating new tokens on the Ethereum blockchain and listing on decentralized exchanges (DEX) is a loophole for teams looking to exploit.
“The creation and testing of tokens is not mandatory and unregulated, so scams of different sizes will still take place,” Grauer said. "New investors will be the top target, because they do not have much knowledge and experience in this field."
Eva Crouwel, the person in charge of financial crime at the Luno cryptocurrency exchange, said that users should be careful about projects that lack transparency, especially without clear development team information, and sketchy websites. , there is no white paper or detailed development roadmap. Besides, do not add strange tokens, read carefully the permissions before giving access to the wallet to avoid losing money.
"Let's start with as much due diligence as possible. It is advisable to look closely at the social media profiles of the development team, the company, the smart contract, and pay attention to the previous users' comments on the feedback page. Besides, it is possible to see the reputation of each member of the project team in the crypto community before deciding to invest," advises Crouwel. This expert also said that users should not invest too much money and determine to lose them if something goes wrong.
