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- 1 Fake tokens and misleading code tricked investors.
- 2 The illusion of legitimacy fools some detectors.
- 3 Over $32 million was stolen across 1,300+ incidents.
A group of crafty cryptocurrency scammers managed to rug-pull over 42,000 victims out of $32 million since April 2022. They accomplished this through a deceptive approach involving faked token supplies and bait-and-switch contract codes.
Tricking Victims Through Token Minting/Burning
According to a January 18th report by blockchain security firm Blockfence, the scammers manipulate the apparent maximum token supply. They mint new tokens to make supplies seem higher, then burn tokens to reduce circulating supplies artificially.
This makes investors think token values will rise more significantly in the future. However, the scammers can mint endless new tokens to rug-pull victims.
Code Bait-and-Switch Maintains Illusion
The scammers also utilize a code bait-and-switch tactic to deceive holders and detectors. They inject fake liquidity into decentralized exchange pools to mimic legitimate trading volume and activity.
Then, a lock function is implemented on liquidity pool tokens to signal investors cannot be rug-pulled. However, a setUserBalance function later updates victim token balances to “1”, making selling impossible as the tokens get burned.
So, tokens still show in wallets, further fooling users. The scammers ultimately remove all liquidity to tank the token price.
Renounced Ownership Dodges Some Detection
By renouncing ownership of the contract, scams employ a deceitful tactic that bypasses certain fraud detection tools, leading investors to believe falsely in the token’s safety.
Blockfence has identified over 1,300 instances of rug pulls across the Ethereum platform utilizing these techniques, underscoring the prevalence of such deceptive practices. These novel methods present challenges for developing more effective fraud detection mechanisms in the cryptocurrency space, emphasizing the importance of heightened vigilance and innovative solutions to safeguard investors from financial exploitation.
Scams Persist Despite Previous High-Profile Collapses
The evolution of rug pull tactics continues to unfold, even after significant cryptocurrency failures in 2023, such as those involving Celsius and FTX, resulting in substantial losses for investors. Despite these high-profile incidents drawing attention to the risks within the crypto space, they have not acted as a deterrent to the proliferation of scams.
According to estimates from blockchain security platform Immunefi, rug pulls in 2023 led to over $103 million in theft. These fraudulent schemes often involve a combination of social engineering and technical deception, making them challenging to detect before they collapse and vanish with the funds.
The persistent emergence of such tactics underscores the ongoing need for heightened vigilance and security measures within the cryptocurrency ecosystem. Investors and stakeholders remain on alert, navigating the evolving landscape of crypto risks.
Conclusion
As cryptocurrency adoption expands, attracting capital through fraud remains an unfortunate risk requiring vigilance. This latest rug pull snaring 42,000 victims demonstrates that even after last year’s scandals, the space still harbors scammers finding new ways to trick holders.
With improved detection methods and wariness around the promise of “guaranteed” gains, the crypto community can hopefully better identify risks hiding under the cover of sophistication. However, investors always need to remember that if an opportunity appears too good to be true, it very well may be.
Steve Anderson is an Australian crypto enthusiast. He is a specialist in management and trading for over 5 years. Steve has worked as a crypto trader, he loves learning about decentralisation, understanding the true potential of the blockchain.
