Almost One Crypto with Ill Intentions Created Every Day in 2022
Solidus Labs, a blockchain risk evaluation company, reports that over 350 bogus crypto tokens were produced daily in 2018, robbing millions of investors. As per Solidus’ 2022 “Rug Pull Report,” 117,629 “scam tokens” were distributed from the beginning of 2022 to December 1st. That is a 41% rise over the almost 83,400 fraudulent tokens found by Solidus in 2021.
According to the analysis, BNB Chain has the biggest amount of fake tokens, with 12 percent of all BEP-20 tokens likely fake. The Ethereum network ranked second, with 8% of ERC-20 tokens allegedly being fraudulent.
A rug pull is a form of cryptocurrency exit fraud in which a person or group launches a crypto token and inflates its price before collecting all of the proposal’s wealth and departing it when the crypto token’s price plummets to zero. Since September 2020, about 2 million investors have suffered losses to these frauds, surpassing the assessed 1.8 million creditors impacted by the bankruptcy of cryptocurrency exchanges and loan portals FTX, Celsius, and Voyager.
The most prevalent form of the fraudulent token was a “honeypot,” which is a crypto token smart contract that prohibits reselling. The most prominent “honeypot” effectively accomplished in 2022, according to Solidus, was the $3.3 million Squid Game (SQUID) token fraud, which increased 450% within a matter of days as investors invested in the hype but were not able to sell, resulting in the creators presumably fleeing with investor monies.
Centralized exchanges (CEXs) are similarly susceptible to rug pulls since the perpetrators of these malevolent tokens utilize them to finance their bogus enterprise and pay out illicit proceeds. From September 2020, Solidus asserts that more than $11 billion worth of Ether (ETH) stolen via fraudulent tokens has moved via 153 cryptocurrency exchanges (CEXs), with the bulk of the cryptocurrency exchanges supervised by United States authorities.
During the investigated time period, approximately $4 billion went to U.S. CEXs, which was almost double that of the second-most vulnerable CEX state, The Bahamas.
Kelly is our in house crytpto researcher, delving into the stories which matter from blockchains being used in the real world to new ico coming out.