The decentralized finance industry is one of the most distinct industries in the crypto market, as it boasts all kinds of financial products. With this, traders carry out millions in transactions every day, with most of the tokens having massive amounts locked in them. Despite the many opportunities to make profits in the market, it is not as safe as it should be. Besides regulation, there have been issues of scam artists ravaging the crypto market, trying to defraud investors. But while that is something that traders are now guiding against, there is another issue of Rug Pulls. This article will look at Rug pulls, and the top three Rug pulls in the DeFi sector this year.
What is a Rug Pull?
A Rug pull is a scam relating to the founders of the developers of a project in the DeFi sector. In simple terms, developers Rug pull investors when a platform is closed after taking their money. A rug pull usually occurs after when the price of a token has skyrocketed. After that, the developers use a back door to drain the platform and steal finds belonging to clients. Regulations in the decentralized finance sector are not as intense as that of the centralized sector. This is why the security in the sector is not as strong as it should be. With this, malicious actors feel they can do anything they like with investors’ cash.
How is a Rug Pull carried out?
With scams and hacks relatively known ills in the decentralized finance sector, a rug pull is carried out to wipe out all the token’s market cap. They are a scam that signals the exit of developers and cash that belongs to clients. The modus operandi of these rug pull scammers is to create a token that will generate massive waves in the market. After generating a lot of attention, traders and investors troop in to invest their funds, trying it up in the liquidity pools. After seeing that they have had enough money in the liquidity pools, the developers then drain all the funds, which pushes the token in the red and brings losses to the investors.
Top 3 Rug Pulls of 2021
Over the years, several projects that have resulted in rug pulls have entered the market, showing promise. Some projects have been backed by known entities, which ended up as Rug pulls. One of the reasons this act will continue in the market is the lack of regulation. Anyone who knows how to deploy a smart contract can develop a token and invite traders to invest their hard-earned money. Below are the top 3 rug pulls that have occurred this year.
#1 AnubisDAO ($60 million)
AnubisDAO was launched on October 28 as a fork of OlympusDAO. OlympusDAO acts as a currency in decentralized finance backed by bond sales and fees from liquidity providers. Before the launch, the developers behind the token had a discord server for the token and ran a Twitter account that gave frequent updates.
Although there was no platform, investors poured about $60 million into the ICO, which would reward them with ANKH tokens. With the sale reaching 20 hours, someone transferred all the liquidity in the pool to an entirely different wallet. According to investors, many thought the token would get the mainstream adoption that other dog-inspired tokens have been getting.
Fast forward to days after, investors started to offer anyone who could provide vital information about 1,000 in Ethereum. Although a handle claimed that the developers suffered a phishing attack, everything pointed out that it was a clean sweep. With the look of things, the developers of AnubisDAO rug pulled investors, scamming them if $60 million in the process.
#2 Meerkat Finance ($31 million)
Meerkat Finance was launched on the Binance Smart Chain on March 3, seeing an inflow of investors making investments. A day after, Meerkat Finance announced that it had suffered a hack. According to the developers, hackers were able to gain access and siphoned $31 million. However, most of the investors said they thought the developers stole the funds.
The statement mentioned that its vaults had been breached, and the hackers have drained $13 million in BUSD and more than $17 million in BNB. Immediately after the hack, the protocol, social media, and official platform went dark. With that, investors could not get hold of the developers, pushing them to conclude that they had been Rug pulled. Although Binance said it would look into the rug pull, the investigators have done nothing since then.
#3 TurtleDEX ($2.4 million)
TurtleDEX entered the Binance Smart Chain on March 15, saying it would provide users access to secure storage to store data online. In its presale, the decentralized exchange was able to raise about $2.4 million in two hours. In just five days after the launch took place, the developers of the platform rug pulled investors.
According to records, all the liquidity in the pools belonging to the platform on ApeSwap and PancakeSwap got drained. From the records on Etherscan, the funds in the liquidity pools were drained and exchanged to Ethereum before being moved to a list of Binance wallets. After the act took place, the developers deleted their Twitter and Telegram before taking their platform offline.
Other worthy mention
Squid token ($2 million)
The Squid token debuted on decentralized exchanges such as Dodo and PancakeSwap, with the listing boosting its price to more than $2,800 per token. Before the curtain fell on the massive rise, its developers had rinsed everywhere clean, and Rug pulled investors. According to the record, the website, social media accounts that belonged to the developers were nowhere to be found in the morning that followed.
To worsen the situation, the developers exchanged the SQUID tokens in the liquidity pool to BNB, carting away about $2 million in the process. However, the official telegram of the token said scammers stole the lost tokens, and the group would be dissolved due to depression on their side.
One thing that is harder than every other thing in the decentralized finance sector is to spot a fraudulent account. You should endeavor to be vigilant and not get carried away by most projects that look too good to be true. Another thing is to conduct deep research on projects, tokens, and anything new in the DeFi sector before you decide to go all in. Although most scammers and hackers can mask their activities and defraud people, deep research will expose and help traders in the market.Top 3 Rug Pulls In The DeFi Sector 2021