A recent report from Chainalysis revealed that rug pull is one of the latest innovations of crypto scamming in 2021, which accounts for 37 percent of all cryptocurrency scams in 2021 compared to 1 percent reported in 2020. According to the report, in 2021 rug pulls took over $2.8 billion worth of cryptocurrency from victims.
What is a rug pull in crypto?
A rug pull in the crypto space is when an individual or group of people develop a crypto project and lure people into investing in that project with a series of bogus promises, only to pull out all their investments with profits after a few rallies since they are generally the largest holders in the project. With top investors out, smaller investors will struggle to make money or be forced to abandon their investments with no end in sight.
These tend to be low-effort projects created by a few individuals with the goal of fleecing unsuspecting investors. It is most commonly mentioned when a token’s team removes liquidity.
A typical rug pull project is “Squid Game Token” named after the Netflix drama “Squid Game”. The squid game token surged from an All-Time-Low of $0.0007926 on the 1st of November 2021 to $2,861 per token in the same month. The token is currently trading at $0.105 per coin.
The report, however, noted that rug pulls are mostly seen in DeFi projects where developers create and promote new tokens to investors with the hope that the new token will rise in value because developers can easily create cheap tokens on the ethereum blockchain and get them listed on decentralized exchanges without code audit.
Senator Elizabeth Warren, an active critic of cryptocurrency, called DeFi “one of the shadiest parts of the crypto world”.
She said, “stablecoins pose risks to consumers & to our economy. They’re propping up one of the shadiest parts of the crypto world, DeFi, where consumers are least protected from getting scammed. Our regulators need to get serious about clamping down before it is too late.”
The chart below shows 2021’s top 15 rug pulls in order of value stolen.
Thodex was the biggest rug pull of the year, a Turkish centralized exchange whose CEO disappeared after the exchange suspend its users from withdrawing their funds on the platform. This represents almost 90 percent of all investment scams through rug pull, seeing users lose over $2 billion worth of cryptocurrency. In all, rug pulls took in more than $2.8 billion worth of cryptocurrency from victims in 2021.
Chainalysis report further revealed that scams involving digital coins are the largest form of cryptocurrency-based crime by transaction volume, with over $7.7 billion worth of cryptocurrency taken from victims worldwide.
Crypto unregulated market makes investors susceptible to scams, and this might deter the successful adoption of cryptocurrency.
Fintech CEO: Tesla Crypto Mining Quality Debate Illustrates Custody Quandaries
CNBC broke a story about Siraj Raval, a man claiming significant profits off his 2018 Tesla Model 3, turning the car into a Bitcoin mining machine. Others interviewed in the article downplayed the possibilities for significant profit. One fintech CEO offered his comments on how the controversy has corollaries to the existing custody market.
“As long as there is profit to be made in digital assets, there will be folks looking for ways to cash in, utilizing any edge available to them. While many consider the efforts of Rival to be not worth the hassle, folks will always look for a way to get their slice of the pie — even if it isn’t optimal. Just look at the custody situation playing out right now. The companies, even those which are considered industry leaders, are lacking,” said Richard Gardner, CEO of Modulus, a US-based developer of ultra-high-performance trading and surveillance technology that powers global equities, derivatives, and digital asset exchanges.
Fireblocks, which is among the best known custody providers, found itself embroiled in a lawsuit with StakeHound, which alleges the custody company lost roughly $70MM of Ethereum, after the key vanished. As a result, StakeHound could not access over 38,000 ETH.
“It is like back in the gold mining days. It wasn’t just those that found gold that hit it big. So, too, did the providers of pickaxes and blue jeans. Remember Levi Strauss? It isn’t just about making money on the investment side. Here, folks will look for ways to mine or find other ways to involve themselves in the ecosystem,” Gardner said. “The custody providers we have now aren’t those who have a long track record in fintech or cybersecurity. Instead, they’re folks that jumped in, gathered some big name investors, and called it a day.”
Modulus is known throughout the financial technology segment as a leader in the development of ultra-high frequency trading systems and blockchain technologies. Modulus has provided its exchange solution to some of the industry’s most profitable digital asset exchanges, including a well-known multi-billion-dollar cryptocurrency exchange. Over the past twenty years, the company has built technology for the world’s most notable institutions, with a client list which includes NASA, NASDAQ, Goldman Sachs, Merrill Lynch, JP Morgan Chase, Bank of America, Barclays, Siemens, Shell, Yahoo!, Microsoft, Cornell University, and the University of Chicago.
“The current crop of custody providers smelled blood in the water and identified the need. They didn’t consider what would happen when their product was exposed for being less than what the industry required. Custody in the digital assets space is much more than an administrative process. There is a lot more to it, and we’re already starting to see the cracks among the Johnny-come-latelies,” said Gardner.
Elon Musk Condemns Twitter’s Adoption of NFTs
The richest man in the world and CEO of Tesla, Elon Musk has expressed his displeasure over Twitter’s integration of non-fungible tokens (NFT). In a tweet on Friday, Musk criticized the microblogging platform for not combating cryptocurrency fraudsters who spam tweet comments, oftentimes offering fake giveaways.
The SpaceX founder described Twitter’s NFT integration as “annoying” and irritating, saying that, “Twitter is spending engineering resources on this bs (sic. Nonsense) while crypto scammers are throwing a spambot block party in every tread!?”
Unfortunately, Musk’s tweet was followed by some bots he had called out Twitter to deal with. The spam bots tweeted fake giveaways in the billionaire’s tweet thread. Some are of the belief that the Tesla CEO’S criticism of Twitter’s NFT is possibly due to fraudulent accounts which often parody those of celebrities on Twitter, scamming victims through fake offers. Another genuine reason to worry, some say, is the risk account hackers pose also to token owners.
In September last year, Twitter had announced that it would include a way for users to use NFTs as their profile pictures. However, this feature will only be available to those who use the platform’s premium subscription service – Twitter Blue on Apple’s iOS devices.
Defining NFTs, the company states that they are digital items that you own. “Proof of ownership is stored on a blockchain, a digital database that is publicly accessible.” Twitter further explains that each NFT profile picture is displayed in a special hexagonal shape. This is unlike the standard display pictures on the platform, which are shown in a circular shape. Twitter users can also tap on the hexagonal NFT profile picture to see more information about the digital pieces of art. The images, it adds, are now part of a verified collection on NFT marketplace OpenSea.
According to Twitter’s product lead for the effort, Esther Crawford explained that the company is positioning itself as the social network for the discovery, conversation and education around the tokens, blockchain and crypto technology.
Crawford said, “Crypto is a key pillar of Twitter’s future. We want to support this growing interest among creators to use decentralized apps to manage virtual goods and currencies. This is just still very early days for us, but we wanted to build something that was a utility for this community that they could start interacting with right now.”
Cardano Price to Reach All-time Highs, Hit Bitcoin and Ether
Cardano, a rival cryptocurrency to Ethereum, is likely to hit all-time highs of $2 before the end of 2022, predicts the CEO of a global, game-changing financial giant.
The bullish prediction from Nigel Green of deVere Group comes as Cardano (ADA), the fifth largest crypto, has jumped by almost 50% in just seven days ahead of a major new tech launch today, and currently has a market capitalisation of more than $47 billion.
He says: “Cardano is coming of age in 2022 and we can expect its price to soar and take more market share from crypto rivals, including Ethereum.
“The main reason why Cardano has jumped dramatically in price over the last week is due to the enthusiasm surrounding the launch today of SundaeSwap, which will make use of its pioneering underlying blockchain technology.”
The crypto advocate goes on to explain: “SundaeSwap is a decentralised cryptocurrency exchange on which users can buy, sell, lend, borrow and swap Cardano tokens as well as the exchange’s own SUNDAE token.”
According to reports, 2 billion SUNDAE tokens are to be issued at the launch on Thursday, 55% will go to the public, 25% to the developers, and the rest will go to investors and advisers.
“I’m confident that we will see Cardano hit fresh all-time highs before the end of the year because the upgrades just keep on coming,” says Nigel Green.
“We’re hitting the next stage of Cardano’s five defined eras of development. This next one is called Basho – named after a Japanese poet – and it promises to further improve the scalability and interoperability of the network through both on-chain and off-chain enhancements.
“Inevitably this is going to excite investors who are likely to increase their exposure to the cryptocurrency, driving up its price considerably.”
In September last year, the deVere CEO, who has a proven track record with crypto predictions, said: “Cardano is likely to be a challenger to Ethereum as not only can it be used as currency, but its blockchain – the tech on which it runs – can also be used to build smart contracts, protocols and decentralised applications. Plus, it is said to be significantly more scalable than Ethereum.
“It will also pose a challenge to the all-mighty Bitcoin. This is because those who invest in digital assets already or are planning to do so, know that one of the secrets of successful investing is diversification.
“Therefore, these investors will want their cryptocurrencies diversified too and this is ultimately likely to eat into Bitcoin’s market share.”
Of the current price rebound, Nigel Green concludes: “I believe this is just the start of what should be a monumental year for Cardano.”
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