Rug pulls or exit scams accounted for over 35 % of all crypto scams in 2021, draining about $2.8 billion in funds, based on blockchain analysis agency Chainalysis. With that in thoughts, allow us to discover essentially the most infamous crypto rug pulls witnessed by the trade up to now.
In case you are accustomed to the cryptocurrency area, you’ll have heard of the time period ‘rug pull’. If not, right here’s a fast recap. Rug pulls are techniques employed by scammers who initially promote their mission by promising excessive returns, however then vanish with investor funds, leaving no hint behind.
These new to the crypto area could surprise that such occurrences have to be uncommon, however sadly, that isn’t the case. Rug pulls or exit scams accounted for over 35 % of all crypto scams in 2021, draining about $2.8 billion in funds, based on blockchain analysis agency Chainalysis.
With that in thoughts, allow us to discover essentially the most infamous crypto rug pulls witnessed by the trade up to now.
OneCoin
OneCoin was launched in 2014 with the ambition of changing into a “higher Bitcoin”. The corporate gained important consideration when its CEO, Ruja Ignatova, also referred to as ‘Cryptoqueen’, appeared at Wembley Stadium in entrance of an viewers of 90,000 individuals in 2016. Across the identical time, OneCoin even surpassed Bitcoin’s market capitalization by 50 %.
Nonetheless, it was later found that OneCoin was not the revolutionary “Bitcoin killer” it claimed to be, however quite an elaborate Ponzi scheme disguised as a multi-level advertising operation. It was believed that OneCoin defrauded individuals out of greater than $4 billion.
Throughout the nascent stage of cryptocurrency in 2015, when scams had been comparatively simpler to execute, Ignatova capitalised on the hype surrounding OneCoin. She offered fraudulent instructional programs that purported to show members the method of mining OneCoins, which finally turned out to be a nugatory digital asset.
Together with her spectacular credentials, together with a PhD and expertise at prime consultancies, Ignatova gained widespread recognition for OneCoin. She even appeared within the Bulgarian version of Forbes, making it difficult for individuals to query its legitimacy.
In 2018, authorities raided OneCoin’s headquarters in Sofia, Bulgaria, ensuing within the arrest of co-founder Sebastian Greenwood and Ignatova’s brother, Konstantin Ignatov. Nonetheless, Ruja Ignatova managed to evade seize and was just lately added to the FBI’s most-wanted checklist. The investigations into the OneCoin rip-off are nonetheless ongoing.
Thodex
On April 22, 2021, Turkish cryptocurrency change Thodex abruptly ceased its operations with none prior discover, leaving the funds of 391,000 lively merchants locked on the platform. The change later posted on Twitter that this determination was made as a consequence of an exterior funding that required the suspension of buying and selling for a interval of 4-5 days.
A day earlier than this improvement, Thodex CEO Faruk Fatih Özer fled the nation and deleted his social media accounts. Moreover, the corporate ceased all buyer help companies. It was later estimated that the full quantity of funds trapped within the platform ranged between $2 to $10 billion.
Shortly earlier than disappearing, Thodex ran a advertising marketing campaign the place it rewarded each new signup with 150 Dogecoins, leading to a big inflow of funds. Between March 15 and April 15, 2021, the platform skilled its highest-ever day by day buying and selling quantity, reaching a staggering $1.37 billion.
Sadly, this incident turned out to be a horrifying rug pull, leaving many buyers in a state of shock.
Anubis Dao
AnubisDAO was launched in October 2021 and positioned itself as part of OlympusDAO, a decentralised reserve forex supported by liquidity supplier charges and bond gross sales.
Inside every week of its launch, a staggering $60 million value of ETH vanished from the mission’s liquidity pool. Buyers had initially invested this capital within the token sale and had acquired ANKH tokens in return. Nonetheless, inside a mere twenty hours of the sale, the liquidity within the pool was transferred to a special deal with and the funds had been by no means recovered.
One investor, Brian Nguyen, skilled a lack of $470,000. In an interview with CNBC, he mentioned that he was drawn to the mission as a consequence of its dog-themed brand, paying homage to the hype surrounding cash like Dogecoin and Shiba Inu.
Luna Yield
In August 2021, DeFi yield aggregator Luna Yield disappeared with buyer funds, defrauding buyers of $6.7 million. This incident occurred merely two days after the mission’s launch. Shortly after its sudden exit, the mission’s web site and social media accounts vanished.
The builders of the cross-chain mission carried out the rip-off by conducting a number of transactions involving WETH, WBTC, LUNY, and USDT, which had been subsequently transferred to an nameless Twister pockets. Twister is a cryptocurrency mixer used for facilitating nameless transactions.
Luna Yield had initially launched its mission via SolPAD, a Solana-powered fundraising platform. This launch served because the mission’s second preliminary DEX providing (IDO), following Solstarter. An IDO includes a blockchain mission promoting a brand new cryptocurrency to lift funds, and on this case, it was the LUNY token.
StableMagnet
In June 2021, the StableMagnet group orchestrated a theft of $27 million, leaving their customers in shambles. What made this rip-off distinct from different rug pulls was the manipulation of sensible contracts.
Block explorers like Etherscan carry out code verification to make sure that the listed supply code matches the precise code saved on the blockchain. Nonetheless, the StableMagnet group deployed a wise contract that claimed to make use of the features from one specific contract whereas truly using a special sensible contract.
This tricked blockchain explorers into incorrectly verifying the posted supply code, which made the sensible contact seem professional. Exploiting this loophole, StableMagnet used a hidden backdoor of their sensible contract to empty worth from the protocol.
Conclusion
Rug pulls proceed to rear their ugly head even in 2023. Simply final week, the Swaprum rug pull incident defrauded buyers of $3 million. Sadly, exit scams have change into more and more frequent because of the speedy emergence of latest DeFi initiatives and poor safety measures which might be unable to maintain up with the trade’s technological developments.
Whereas keeping track of new initiatives could be a technique to keep forward and doubtlessly earn good returns, it’s essential to not overlook pink flags, comparable to overly promising schemes, or initiatives missing a whitepaper and correct data on group members. Diligence and thorough analysis are important to keep away from falling sufferer to a rug pull.