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As the world of cryptocurrency expands rapidly, it is no surprise to see that people are already exploring methods to exploit the new system. Introducing rug pulls, an elaborate scam where a team raises money for their new project by inflating the price of their token, then exits with the money. The people behind rug pulls accomplish this feat by pooling investors’ funds in a liquidity pool, then drain the pool – running off with the money. Oftentimes, these scammers list their products without code audits, which give them an easy way out. This leaves investors with assets that are worth almost nothing. In simplified terms, one could imagine crypto rug pulls to be elaborate scams disguised as giveaways.
In recent times, these rug pulls have been increasingly prevalent within the crypto world, so we compiled a list of the largest rug pulls you should know about.
While certainly not recent, OneCoin still holds the title as the biggest cryptocurrency scam and rug pull to date. Founded in 2014 by CEO Ruja Ignatova, the company had plans on becoming the next big cryptocurrency – even bigger than the current leader Bitcoin. The project began to gain major traction after Ignatova spoke in London’s Wembley Stadium, where her pitch reached 90,000 in person and much more online. From then, OneCoin was able to accumulate millions.
However, In 2017, Ruja Ignatova disappeared without a trace and is still not found to this day. Her brother Konstantin Ignatov took the fall and pleaded guilty to the $4 billion dollar fraud scheme. It was later discovered that the blockchain to support the cryptocurrency never even existed; the currency was based on an SQL server. Furthermore, OneCoin operated as a ponzi scheme that rewarded investors to persuade their family and friends to invest as well.
Prosecutions and investigations of this event continue to the present date.
Launched on October 28 of 2021, Anubis DAO launched and instantly gained widespread success – raising almost $60 million with its own token ANKH. Anubis DAO was marketed as a fork of Olympus DAO, a decentralized and trusted reserve currency. However, just twenty hours after launch, the money in the liquidity pool was transferred out and disappeared. An investor by the name of Brian Nguyen admitted to losing $460,000 after being drawn in by the dog-inspired cyrpotcurrecny which reminded him of successful projects dogecoin and shiba inu.
While at the time, the main developer, going by the name “beerus”, claimed to have been the victim of a phishing scam, many are still hesitant to deem it as a scam as authorities continue to investigate.
Perhaps the most flashy rug pull on this list, the creators behind DeFi100 were able to scam investors out of $32 million. Being the first cryptocurrency project to be built on the Binance Smart Chain, DeFi100 was intended to be “a synthetic index fund protocol and a rebase project” that would “ serve as an investment vehicle for the entire DeFi market.” However, on May 22nd of 2021, the website displayed a singular message: “We scammed you guys, and you can’t do s[***] about it.” The next day, the team took to Twitter to claim that their website was hacked and the scam was false. While many remained skeptical of the cryptocurrency, it began gaining a bit of traction, before dying out. Today, DeFi100 is not traded and their Twitter account is inactive.
On June 23 of 2021, investors who had believed in Stable Magent’s Automated Market Maker lost millions – $27 million to be exact. Developers of Stable Magnet were able to pull off this elaborate scam by exploiting a novel rug method. Since Etherscan or BscScan do not verify linked libraries, the team behind Stable Magnet was able to hide a secret backdoor in their smart contract that could be used to drain the money and to transfer more tokens to those who had approved.
Fortunately, there has been some recent good news for the investors. A fellow victim of the rug pull, a hacker was able to track down the scammers and recover most of the funds.
On August 16 of 2021, SolPAD, Solana’s initial digital offering platform (IDO), tweeted, announcing the public sale of Luna Yield. Just three days later, they tweeted again, but this time about the mysterious disappearance of Luna Yield’s website, social media platforms, and liquidity. This was Solana blockchain’s first rug pull, and it was a big one – taking an estimated $6.7 million away from investors.
Eventually, SolPad settled to reimburse investors with 60% of their purchase. While the investors were able to claim some of their money back, Luna Yield’s rug pull sparked conversation over proper regulation with IDOs.
A very recent rug pull, Animoon pulled the rug out from its investors in June of 2022 – costing them an estimated $6.3 million. Animoon is heavily based off of the popular game Pokemon, as it took character designs and recolored them to market as their own NFTs. The project marketed itself as a play-to-earn and interactive game that would even distribute dividends to holders of legendary Animoon NFTs. Social media star and boxer Jake Paul came under fire as he had previously promoted the NFT scam.
Evolved Apes was an NFT project launched by a developer named “Evil Ape”, and fittingly so, the developer disappeared with an estimated $2.7 million a week after launch. The original project was marketed as a fighting game, where investors could purchase an ape in order to use the NFT as a character. There were also social media competitions in order to promote the project, but it was later discovered that the winner, nor the digital artist, were paid their promised earnings.
While the project was drained of its funding, some of the figures within the evolved apes community have decided to carry a variation of the project on. The new NFT project is titled Fight Back Apes, which signifies their efforts of “fighting as a community against our nemesis Evil Ape.” Their twitter account is still active as of recently.
As the name suggests, May 5th, 2022 was truly a day of defeat for investors that had poured their assets into the NFT collection. The NFT project, titled Day of Defeat, was a playable game that made the claim that investors would get 10,000,000 times their initial investments in returns. However, the project’s funding emptied out as $1.35 million was dispersed among unknown wallets. While the team behind the project claims they were also victims of a scam, many investors and web3 figures continue to remain skeptical – even tweeting about the alleged rug pull.
An NFT rug pull in 2022, the creators of this NFT collection made off with an alleged $1.3 million. Many investors, such as Joshua Christian who stated that the collection “looked really cute on the website”, lost thousands of dollars. From then, the scammers used tools such as TornadoCash to anonymously disperse their funds. However, the two minds behind the rug pull were caught and charged by the U.S. Department of Justice (DoJ) in March of 2022. The two individuals were named Ethan Nguyen and Andre Llacuna, and they are now facing up to twenty years in jail for non-fungible token fraud and money laundering scheme. At the time of their arrest, the two were on track to launch their second NFT project titled Embers
While the Azuki NFT collection does not directly fit into the category of rug pulls, it is worth noting that the creator, by the name of Zagabond, released a short blog via Twitter that outlined his past failures in NFT projects CryptoPhunks, Tendies, and CryptoZunks. While Zagabond portrayed the story as a learning experience, many were quick to call him out for pulling the rug. Some of his former team members even came out and accused him of scam – saying that the creator profited up to $3 million. While there is no clear verdict, many investors in Azuki were quick to pull out after the confessions, which dropped the floor price of the collection by 60% in the first couple of weeks in May of 2022.
ABOUT THE WRITER
Daniel Shin is a contributor to Identity Review from the University of Southern California. Do you have information to share with Identity Review? Email us at firstname.lastname@example.org. Find us on Twitter.
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