Introduction
Introduction
A so-called rug pull occurs when a malicious cryptocurrency developer or leader abandons a project and walks away with all the funds generated by the project. The carpet-pulling scam is one of the common scams in the cryptocurrency investment market. After the project developer gets investors to buy in a large amount through marketing and promotion, they abscond directly with the money under the pretext of abandoning the project. While rug pulling is a form of theft, they are all too common in the cryptocurrency space.
Rug pulling happens most often with MEME coins and DeFi projects. The number of these malicious schemes is on the rise, with rug pulling projects accounting for 37% of all scam revenue in 2021, compared to just 1% in 2020. Therefore, users must learn to spot potential carpet-pulling cryptocurrencies and avoid being scammed.
famous carpet scam
Squid Game Token
One of the most recent blanket scams happened with the Squid Game token. The Squid Game is a well-known TV series in South Korea, which will become a global hot series and topic in 2021. It describes the economically bankrupt people from all over Korea who are selected to participate in a series of killing games, such as tug-of-war, wooden figures, etc. The winners of these games will win a cash prize large enough to pay off all their debts and even get rich. However, if the user loses in the game, they are killed. Of course this is just a fictional TV series.
People all over the world are fascinated by "Squid Game"!
"The Squid Game" is very popular and has broken many records such as becoming the most popular TV series of all time on Netflix with more than 111 million viewers worldwide, thus attracting attempts to scam money from this hit series The squid game token project.
Squid Game Token Price Trend (SQUID)
On January 11, 2021, SQUID's carpet scam happened. The token’s value dropped from $2,861 to $0.0008 in just 5 minutes, as you can see in the chart below. The project developers apparently ran away with the money users had invested in SQUID tokens.
SQUID/USD
Thodex
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Funds were apparently lost, and the CEO of the exchange disappeared moments before the event. Over 390,000 investor funds were locked and $2.8 billion was stolen from exchange users.
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The Thodex exchange is now inactive
Amid the exchange’s delisting “problems,” Thodex CEO Faith Faruk Ozer fled Turkey to Albania fearing serious criminal charges.
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Thodex CEO flees Türkiye with investor's assets
Others within the company did not escape after the incident. In April 2021, 83 people were detained by the Turkish police and 6 people were arrested, including the siblings of the company CEO and former senior exchange management. Ozer's whereabouts are currently unknown.
What are the signs of carpet pulling?
fake website information
Malicious scammers often place fake information on their company websites to lure users into their scam. For example, Squid Game Token claims that they are the official spokesperson of Netflix, and they have the support of Elon Musk. Additionally, their team page shows a large number of employee profiles, which are fake.
website down
If a website is "down" at the same time as other suspicious activity is taking place, it could be a blanket scam. Thorex, for example, had a "website outage". During this outage, senior employees of the site were found to be deactivating their social media accounts.
This would have been a major red flag for users of the exchange. However, in this case, there is very little that the user can do, the user withdraws and the fraudulent exchange can reject the withdrawal request.
Github is a code hosting platform used by most cryptocurrency projects. It allows mass collaboration and open viewing of project code. Lack of Github activity is often a red flag and can be seen as a dubious project, with the potential to run the gamut.
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Figure: Popular DeFi project Comound and its GitHub code
Cryptocurrency projects usually have most of their repositories public. All code modifications made by the project can be viewed by the public. If the repository is not shared with the public, the potential for carpet pulling to occur increases. Additionally, having a private repository goes against the public spirit of cryptocurrencies.
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Missing early developer events
How to do?
Partner
When checking out brand partnerships, checking the partner agency's press release is an initial indicator of whether the partnership is genuine. If there has been a press release, or some other form of announcement on social media, then chances are the partnership is real.
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Squid Game Token Claims Many Partners
Searching for employees on LinkedIn and other social networking sites is an initial step you can take to check if an employee exists. Also, using a backtracking machine and checking to see if they've appeared in other companies' team pages for previously suggested roles can help verify their authenticity.
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Github
When searching for 'team members' of Squid Game Tokens, proving that the profile is fake
For example in the image below, we can see that the public Compound Polkadot node repository has 139 contributors committing regularly, and they also have many previous commits.
Compound/Github repository information
in conclusion
About AAX
About AAX
AAX is an international cryptocurrency exchange with more than two million users worldwide. AAX uses the LSEG technology of the London Stock Exchange to provide users with one-stop cryptocurrency services, including contract trading, 120+ spot trading pairs, P2P cash trading, wealth management products and professional-level API trading, etc.
