First, come up with a catchy name for a cryptocurrency project. Next, convince the credulous to buy associated digital tokens. Finally, abandon the project and keep investors’ funds.
This “rug pulling” scam lacks sophistication but evidently it works. According to Chainalysis, a blockchain data biz, separating cryptocoin buyers from their money in this manner has become particularly popular in the DeFi (decentralized finance) ecosystem and has contributed to a scam surge.
In a post previewing the company’s 2022 Crypto Crime Report, Chainalysis said scams constituted the largest form of cryptocurrency-based crime, as measured by transaction volume. Cryptocurrency investors – if that’s the right term – lost over $7.7bn worth of digital whatever in 2021.
That’s up 81 per cent from 2020, but 2020, amid the COVID-19 pandemic, was an unusual year. This year was not quite as bad as 2019, which was close to $10bn worth of scams. But there were more scams overall (3,300 in 2021, up from 2,052 in 2020), albeit with shorter lifespans (~70 days in 2021, compared to ~192 in 2020 and to around ~2,369 in 2013).
Take-the-money-and-run gambits should not to be confused with losses attributable to security shortcomings at DeFi services that let hackers steal funds, like the recent theft of some $120m in tokens from BadgerDAO or the $31m taken from MonoX. That’s a separate dumpster fire.
Source: Cryptocurrency ‘rug pulls’ cheated investors out of ‘$8bn’ • The Register
Robin Edgar
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