The crypto market, already volatile enough for investors to experiment with, is also plagued by scammers always on the lookout for unsuspecting victims. This year, over 117,620 scam brands were introduced to the global crypto market, which managed to rob multiple people of their hard-earned cash, said Solidus Labs, a crypto trading research organization, in its latest “Rug Pull Report”. Scam tokens are often launched under the guise of promising projects that attract early investors looking to bet on the next to-the-moon tokens.
Binance’s BNB chain and ether have each emerged as the two blockchains most commonly used by scammers to host their fake initiatives.
Alarmingly, between January 1st and December 1st of this year, over 350 fake tokens entered the crypto market every day. solidus said in his report.
This represents a 41 percent increase in fraudulent token launches since last year, as compared to the total number of fraud cases cryptocurrencies was 83,400.
“Over the past five years, rug pulls have gone from a small problem to a major epidemic, with scam token developers stealing billions of dollars from millions of retail investors,” the report states.
Scam tokens are an important part of Rug-pull scamwhere a project is advertised, investors are lured in with early privileges, and once a substantial investment has been collected, project developers abandon investors and leave them stranded.
Most scammers used the “honey pot” technique to fool investors by making them invest in fake tokens and preventing them from reselling the tokens only to later drop the project.
According to reports, over 98,400 cases of honeypot rug pulls were observed between September 2020 and December of this year.
In his report, Solidus named the notorious Squid Game inspired cheat from November of last year as the “most prolific” honey pot scam.
At the time, scammers were believed to have raised around US$3.3 million (approximately Rs.22 million) with this project before abandoning the project, resulting in the “SQUID” token losing 99.99 percent crashed.
The report estimates that as of September 2020, over two million people from around the world have been victims of these rug pulls.
“These scammers – who benefit from the fact that more than 99 percent of their malicious tokens have evaded detection in traditional fraud detection approaches – have traded a total of $11 billion worth of ETH across 153 different CeFi markets during the time period we examined. Exchanges deposited and withdrawn (September 2020-December 2022),” the report said.
With the growing number of scams in the crypto sector, several industry players are urging community members to exercise great caution.
Specklefor example, has planned a community-driven anti-scam initiative to give its community members a say in managing the protocol while rewarding them with rewards paid in USD coins to keep the network scam-free .
In August, the developers of the Ethereum blockchain quadrupled Bug bounty up to $1 million (roughly Rs. 8 crore).
A last report by BanklessTimes has claimed that American crypto investors have collectively lost over $1 billion (roughly Rs. 8,000 crore) to scammers.
Crypto-related scams have also increased significantly this year, according to the report. chain analysissaid in a report two months ago that October was the worst month in terms of crypto crimes, with over $718 million (around Rs. 5,890 billion) in losses recorded that month.
To carry out a crackdown on crypto criminals, law enforcement agencies around the world are reaching out to crypto firms looking for details on suspicious transactions.
In its annual transparency report Crypto exchange Coinbase showed a 66 percent increase in the requests it received from law enforcement agencies, for an annual figure of 12,320. While the US recorded 5,304 requests, the UK took second place with 1,744 requests between October 2021 and September 2022.
