- Carpet pulls are some of the most common crypto scams.
- To protect against these scammers, developers should be aware of three main categories.
The rise of the cryptocurrency industry has attracted many scammers looking to make a quick profit. Carpet pulls have become commonplace on the Web3, although some cryptocurrency scams employ conventional fraud strategies such as Ponzi schemes. Carpet-rolling scammers often use devious smart contracts, defrauding retail investors out of millions of dollars.
Everyone involved in the cryptocurrency industry should be aware of the rug pulls and avoid falling victim to this scam.
There are three main categories:
- Liquidity theft that occurs when token creators withdraw money from the liquidity pool. Several decentralized exchanges (DEX) and crypto-funding platforms depend on liquidity pools. Anyone can add cryptocurrency to these pools with smart contracts to increase the total value locked (TVL) in a Web3 protocol. Developers can cash out of the protocol to their wallets and stop working on the project if they don’t include transparent blocking measures in their code.
- Limit Sell Orders: When creators program tokens so that they are the only ones able to sell them and liquidate their positions when there is enough positive price action, leaving a token worthless.
- Dumping, where developers quickly sell a large number of tokens, driving down the price of the coin. Another name for this is a pump and dump scheme.
Some notable carpet stoppers
Thodex: A Turkish cryptocurrency exchange called Thodex disappeared in April 2021 with approximately $2 billion in investor cash.
A significant sum of cryptocurrency it was held in the accounts of several of their investors. Kaan Savukduran, the seller, has almost $12,000 worth of Dogecoin on Thodex. Seven investors were Mertcan Bayraktar, another dealer, one of whom had three Bitcoins ($150,000) locked in Thodex.
SQUID Carpet Pull Tab: One of the most damaging sales limiting rugs is the Squid Game rug pull. An unidentified group introduced the SQUID cryptocurrency shortly after Netflix’s “Squid Game” gained worldwide popularity. Presumably, this token was meant to be used in a play-to-earn game based on the Netflix series. The SQUID token reached a high of almost $3,000 per token when it launched in late 2021, before dropping to zero.
Uranium financing: In April 2021, Uranium Finance tweeted that $50 million in investor funds had been stolen. Igor Igamberdiev of The Block Research says that the Uranium protocol was exhausted by many coins, including ether and bitcoin.
Frosties NFT Mat: Ethan Nguyen and Andre Llacuna were arrested by the US Department of Justice in March 2022 for their involvement in a fictitious NFT (non-fungible token) project called “Frosties”.
According to estimates, the pair made about $1.1 million from the sale of these NFT animations. Nguyen and Llacuna abruptly shut down the official Frosties Twitter account and Discord server after the NFTs figured it out. The departure of the main developers from the Frosties project was obvious to the NFT community.
Moon Yield: Luna Yield was an ecological liquidity farming project built on the Solana (SOL) platform. The SOL project was growing rapidly when Luna Yield disappeared, reaching a locked-in value (TVL) of $2 billion. The developers of the initiative quickly deleted Twitter, Telegram and website addresses and took more than 10 million dollars in cash.
Luna Yield investors tried but were unable to withdraw their unshared money after their social media pages were deleted due to the negative value of the pool. A second investigation that led to the Luna Yield community pulling the rug out revealed that the transactions were linked to the project developer’s address.
AnubisDAO: On October 28, 2021, AnubisDAO, a successor to OlympusDAO, was launched. The decentralized digital currency called OlympusDAO is supported by bond sales and fees from liquidity providers.
Before the launch, the developers of the token set up a Twitter account and a discord server where they would provide updates.
The ICO, which would give them ANKH tokens as compensation, attracted almost $60 million in investment despite the lack of a platform. Someone transferred all the pool liquidity to a new wallet while the sale was active for 20 hours. Many investors believed that the token would become popular with the general public in the same way that other dog-themed coins had.
The list of cryptocurrency carpet-pullers is long. The ones that appeared above are just a small sample of the long list of cryptocurrency scams and scams. The fact that some famous people have been victims of these crimes shows that no one is safe from them. The famous billionaire Mark Cuban is an example.
Several celebrities, including Kim Kardashian, Snoop Dogg, Lil Uzi and Logan Paul, have been accused of supporting schemes.
In-depth market research and project analysis are necessary for investors to avoid fraud and other bad events.