According to a recent report published by the blockchain research company Chainalysis, cryptocurrency rug pull scams were responsible for more than $2.8 billion in illicit activity in 2021. Furthermore, rug pulls in the decentralized finance (DeFi) space accounted for 37% of all crypto-related scams.
As outrageous as the data provided above seems, it is impossible to dismiss the several news reports detailing how investors in different DeFi protocols were defrauded of their investments.
What Are Rug Pulls?
Rug pulls are malicious maneuvers in the cryptocurrency industry where crypto developers abandon a project and run away with investors’ funds.
There are three main types:
A.Liquidity stealing, which occurs when token creators remove funds from the liquidity pool.
B.Limiting sell orders, where developers code the tokens so they are the only party able to sell them, and they dump their positions, leaving a worthless token once there is enough positive price action.
C.Dumping, where developers quickly sell off an ample supply of tokens, thereby driving down the coin price. It is also referred to as a Pump and Dump scheme.
Was Terra Luna a Rug Pull?
The devastating TerraUSD de-peg event last month led to the erasure of nearly $40 billion of value from the crypto industry so it would be easy to call it a rug pull. The UST de-peg event created a “death spiral” event with LUNA that eventually led to both coins essentially going to nearly zero.
Really it was more a result of bad design or a technical failure but even that is debatable. If we count it as a rug pull then it was absolutely the biggest one in crypto history.
The Biggest Rugs Ever
Now that you understand what Crypto rug pulls are and the major types that exist, below are the biggest Crypto Rug pulls ever.
1. OneCoin
OneCoin was a cryptocurrency-based Ponzi scheme. The companies behind the scheme were OneCoin Ltd. and OneLife Network Ltd., founded by Bulgarian national Ruja Ignatova, who vanished in 2017. However, not before the scheme raised $4 billion.
The company’s primary business was selling course materials and functioned like a multi-level marketing scheme where buyers were paid to recruit new buyers.
However, the coin was not traded actively and could not be used to make any purchases.
After a warrant was placed for her arrest, the founder vanished in 2017 and handed over control to her brother, Konstantin Ignatov. The latter was arrested in 2019 and eventually pleaded guilty to fraud and money laundering.
2. Thodex
In 2021, Turkey opened an investigation into Fatih Faruk Ozer, the founder of the cryptocurrency platform Thodex on suspicion of fraud and founding a criminal organization.
The platform announced on its website that it had suspended operations due to a ” partnership offer” and assured users that service would resume after five working days.
Unfortunately, this never happened.
The trading volume of Thodex was reportedly worth billions of dollars before it went offline.
3. Anubis Dao
This project claimed to be a decentralized reserved currency backed by bond sales and liquidity provider fees.
Despite not having a website, the team had a discord server and an active Twitter account with a massive following.
The initial token sale raised $60 million in ETH from investors in return for the ANKH token. However, twenty hours into the sale, the funds in the investment pool were sent to a different address and were never recovered.
4. Defi100 coin
This stands out as one of the most brazen rug pull incidents in the crypto community.
The Defi100 project, built on the Binance Smart Chain, was a DeFi protocol.
On May 22, 2021, the coin’s website displayed a message saying, “we scammed you guys, and you can’t do shit about it”.
According to Cryptoanalysts, the creators vanished with investors’ funds worth $32million.
5. Stable Magnet Rug Pull
The rug pull from the Stable Magnet automated market maker (AMM) is valued upwards of $27 million.
The method utilized was a novel attack system exploiting Etherscan and BscScam verification models.
This attack allowed the stable magnet scammers to deploy a different code library from the one cited in the source code to drain pairs and transfer tokens.
6. Luna Yield
The yield aggregator launched via Solpad vanished with close to $6.7 million of different digital currencies.
Luna yield promoted itself as an authentic project focused on aggregating and optimizing yield farming for users, and received massive support from the Terra ecosystem.
However, three days after its initial DEX offering (IDO), Luna transferred funds to Tornado cash so it could not be traced and shut down its website.
7. Swipathefox project
This was a notorious rug pull because Sacramento Kings star guard De’Aaron Fox launched the project.
This was an NFT project with 6000 unique fox-like characters minted on the Ethereum blockchain and supported by the OpenSea secondary marketplace.
The project came with exclusive offers and giveaways, and generated a lot of excitement.
Unfortunately, the project was abandoned, the website shut down, discord and social media pages also vanished and $1.5 million in profit disappeared.
After this incident, a half-hearted apology was offered by the player, saying he abandoned the project due to the busy schedule of the NBA. Meanwhile, holders of the NFT were only offered compensation if they were above a certain investment tier.
8. Iron Finance
This one is more of a dump. Whales who had large positions in the liquidity pools of Iron Finance began swapping huge amounts of their rewards, quickly affecting the price of TITAN, and causing others to begin selling off as well.
Within a short period of time, the value of TITAN fell to zero. Mark Cuban was a notable investor affected by this drop. The platform is still functional, but TITAN is no longer an asset used by it.
Conclusion: Always Be Cautious in Crypto
When it comes to crypto rug pulls, the list is endless. The ones highlighted above only offer a glimpse into the horrible world of crypto scams and frauds. No one is immune to falling prey to these incidents, as evidenced by several influential figures who have also been rug pulled. A case in point is popular billionaire Mark Cuban.
Other celebrities such as Kim Kardashian, Snoop Dogg, Lil Uzi, Logan Paul, among others, have also been accused of endorsing projects that turned out to be scams.
Investors must do in-depth market research and project analysis to avoid being defrauded and falling prey to these unfortunate events.
Source Crypto Vantage
Always Be Cautious in Crypto if it sounds too good to survive … it is!
