The Deceptive Crypto Scam Method
In a recent revelation by blockchain security firm Blockfence, a group of fraudsters has orchestrated crypto scams that deceived over 42,000 victims, accumulating a massive $32 million since April 2023. The uniqueness of this scam lies in a method that managed to fool even established “rug pull detectors” in the industry.
According to Pablo Sabbatella, Blockfence’s head of security research, the scammers create tokens that mimic upcoming crypto projects, leveraging the FOMO (fear of missing out) phenomenon to lure unsuspecting investors. They manipulate the token supply through minting and burning, coupled with a code bait-and-switch strategy to deceive victims and evade detection by rug pull detectors.
Sabbatella explained that the scammers kickstart the process by transferring a certain amount of Ethereum to an external account to produce counterfeit tokens. By injecting fake liquidity into their scam projects, they create a facade of genuine volume in liquidity pools on platforms like Uniswap.
To further trick investors, the scammers incorporate a lock() function on LP tokens to give the impression of preventing rug pulls. After inflating the fake token price through wash trading, they execute the setUserBalance function, technically burning the token while displaying it in victims’ wallets to maintain the illusion.
Eventually, the scammers remove liquidity from the LP, causing the token’s value to plummet. To evade detection, the scammers return a portion of the illicit gains to avoid attracting too much attention. The scammers also renounce ownership of the token contract, thereby bypassing certain detector tools.
Pablo Sabbatella emphasized that victims were misled, even fooling some rug pull detectors, resulting in significant financial losses for investors.
Exploitation of Meme Coin Trends
Aside from traditional methods, the scammers impersonated various tokens such as Wisealth, RabbitRun, and DreamFi, taking advantage of the meme coin trend. They created tokens like AIPEPE, Purple Pepe, Pepe Chain, Pepe Race, and Baby Pepe to exploit the popularity of memecoins.
Despite facing approximately $2 billion in crypto thefts, 2023 marked a slight decline in hacking incidents targeting the cryptocurrency industry. According to De.FI’s report, hackers managed to steal $2 billion in digital assets throughout the year, representing a decrease in crypto hacking incidents compared to previous years.
