Over 117,620 scam tokens launched in the crypto market in 2022; Binance, Ethereum most used for fraud: report

The crypto market, which is already volatile enough for investors to experiment with, is also plagued by scammers who are always on the lookout for unsuspecting victims. This year, more than 117,620 fraudulent tokens were launched in the global crypto market that managed to dupe several people out of their hard-earned funds, Solidus Labs, a crypto trade research organization, said in its latest “Rug-Pull Report”. Fraudulent tokens are often launched under the pretext of promising projects, which attract early investors looking to bet on the next tokens “on the moon”.

Binance’s BNB chain and Ethereum respectively emerged as the two most used blockchains by fraudsters to host their fake initiatives.

Alarmingly, more than 350 fake tokens entered the crypto market every day between January 1 and December 1 this year, Solidus said in its report.

This marked a 41% increase in the launch of fraudulent tokens since last year, when the total number of fraudulent cryptocurrencies stood at 83,400.

“Over the past five years, rug draws have grown from a minor issue to a major epidemic, with fraudulent token developers stealing billions of dollars from millions of retail investors,” the report states.

Scam tokens are an important part of carpet draw scams, where a project is advertised, investors are lured in with early privileges, and once a substantial investment is raised, the project developers drop investors, leaving them dry.

Most of the scammers used the “honeypot” technique to dupe investors, making them invest in fake tokens and preventing them from reselling the tokens to abandon the project later.

Over 98,400 cases of honeypot mat pulling were reportedly seen between September 2020 and December this year.

In its report, Solidus named last November’s infamous Squid Game-inspired scam as the most “prolific” honeypot scam.

At the time, the scammers allegedly raised around $3.3 million (about Rs 22 crore) with this project before abandoning the project, causing the “SQUID” token to crash by 99.99%.

The report estimates that since September 2020, more than two million people have fallen prey to these rug pulls from around the world.

“These fraudsters – benefiting from the fact that over 99% of their malicious tokens have escaped detection under traditional scam identification approaches – have deposited and withdrawn a combined $11 billion worth of ETH to/ from 153 different CeFi exchanges during the period we studied (September 2020-December 2022),” the report notes.

In light of the growing number of scams in the crypto industry, several industry players are encouraging members of the community to exercise a high degree of caution.

Polkadot, for example, has planned a community anti-scam initiative, to give its community members a say in the governance of the protocol, while also rewarding them with bounties paid in USD Coin to keep the network scam-free.

In August, Ethereum blockchain developers quadrupled the bug bounty to $1 million (about Rs. 8 crore).

A recent report by BanklessTimes claimed that US crypto investors have lost over $1 billion (approximately Rs 8,000 crore) in total due to scammers.

Crypto-related scams have also increased significantly this year, according to the report. Chainalysis, in a report two months ago, said October was the worst month in terms of crypto crimes, with losses of over $718 million (around Rs 5,890 crore) recorded that month. -the.

In order to execute a crackdown on cybercriminals, law enforcement around the world is reaching out to crypto companies seeking details of suspicious transactions.

In its annual transparency report, crypto exchange Coinbase showed a 66% increase in requests received from law enforcement, bringing the annual figure to 12,320. While the US saw 5,304 requests , the UK ranked second with 1,744 queries between the period of October 2021 and September 2022.

---