What is rag money? Getting to know the Rug Pull scam in digital currency
The world of cryptocurrency is a risky environment. As the possibility of making good profits and incomes is high in this market, there is also the possibility of losing all the assets of its users in the blink of an eye. Because no matter how diligent you are in securing digital currency and protecting your assets, fraudsters and profiteers may still find a new way to steal your funds. Trusting in this market is not easy at all!
One of the most common scams in the cryptocurrency market is the rag money scam. In this way, you will lose your trust because the fraudsters are the developers of the fake platforms that you trusted to invest in their projects. In the rest of this article, we will explain what Rug Pull is and how it is done.
What is rag money?
One of the most common types of fraud in the world of digital currencies is Rug Pull. This is generally a scam By the development team of a fake project is done They lead investors to a fake profitable project and eventually disappear with their money. In this situation, investors have become victims of rogue money fraud and are left alone with worthless assets. In fact, this scam occurs when the development team of a crypto project suddenly abandons the project and steals all of its liquidity.
The word “rag pul” literally means pulling the rug from under someone else’s feet. This term describes the concept of this malicious act well. New projects that are introduced in the world of cryptocurrency quickly become famous among active people in this field due to excessive advertising. Some of these projects are trying to make their project valuable by exploiting people’s ignorance and greed. The token that these fake projects introduce to the market is called a scam token. Scam literally means Scam Is. Many investors may be interested in buying these tokens, and in such a situation, the developers of a scam project will run away with the capital and wealth of these people, so to speak, it will pull the rug from their feet!
Types of Rug Pull
Thanks to the existence of different types of scam sites and fake projects in the cryptocurrency market, there have been a lot of rogue money scams. It is interesting to know that until July 2021, something approx 113 million dollars of capital This method is stolen.
In general, there are two different types of rag money, which we will explain below:
Rug Pull through smart contract manipulation
Token contracts written with ERC20 and BEP20 standards operate based on a function called Approve. This feature can be a way for fraudsters to exploit. In this way, the smart contract of the target token is manipulated in the rogue money scam. In fact, when you, as a user, purchase the desired token from a decentralized exchange, the Approve function of its contract allows you to spend it. But by manipulating this function, new buyers can no longer spend and sell their property. This manipulation gives the authority to sell these tokens to the people identified by the development team or the fraudsters.
Cash pool fraud
Rogue money through a liquidity pool is a common and popular method among crypto scammers. To run this scam, you need the following:
- A worthless token
- A well-known cryptocurrency like Ether
- A decentralized exchange
You probably know that creating a new token is a relatively simple and hassle-free process. Therefore, any person as a developer can create a new project and token. On the other hand, decentralized digital currency exchanges allow anyone to create a liquidity pool between any two digital currencies. As a result, fraudsters create different liquidity pools in decentralized exchanges such as UniSwap or Pancake Swap. These pools consist of the desired project token and valuable digital currency such as Binance Coin (BNB), or Ether (ETH). In this way, fraudulent developers can set their listing price as the first creator of these pools without needing to invest huge amounts of money.
In the next step, they should spread the name of their project using deceptive advertisements. When the attention of investors is drawn to this project, many people unconsciously apply to buy this token. During this operation, duped investors fund the pool using valuable cryptocurrencies and receive some worthless tokens in return, hoping for significant growth in the future; But they encounter an unfortunate incident.
The developer team of the mentioned fake project, which has the largest share in the liquidity pool, can withdraw its share. In this case, the pool becomes almost empty of digital currency. In the end, it is the investors who will be left with some worthless and nameless token.
The biggest rag money in the world of digital currency
As we mentioned in the previous sections, there have been many examples of Rug Pull fraud in the digital currency market. Also, many people have become victims of these scams and lost all their capital. In the following, we introduce some of the most famous examples of rag money in the cryptocurrency world.
One of the biggest money scams in history happened in August 2021. On that date, completely suddenly, the website and all the social networks of Luna Yield Platform became unavailable. This platform operated on the Solana network and had many investors, but it shocked all its users with this incident. When users turned to the platform’s pools to withdraw their assets and deposits, they found nothing. According to the research done so far, it is estimated that the creators of this platform have stolen about 7 million of users’ assets.
Another great example of rogue money in the cryptocurrency market goes back to Meerkat’s DiFi protocol. Meerkat was one of the forks of the Yearn platform that defrauded its users in March 2021. The interesting thing about this big theft is that shortly after this incident, the official Telegram channel of this platform considered this unfortunate incident to be the result of a hacker attack. But all subsequent investigation indicated that someone from within the project was involved as a member of the development team. In Ragpool Project Meerkat, something approx 31 million dollars Assets were stolen from users.
Thodex As one of the digital currency exchanges based in Turkey, it is one of the rogue money scammers in this market. This huge scam happened on May 2021. exchange Thodex On this date, about 2 billion dollars of assets were stolen from its users. That is why it is now known as one of the most violent rag money in history.
Thodex exchange fraud had an interesting method. This exchange made it impossible for users to trade digital currencies without prior notice and quite suddenly. In this way, the assets of more than 400 thousand users were locked in it. Of course, the main perpetrators of this fraud were arrested. But Thodex never regained its former popularity among investors.
One of the most recent examples of rogue money scams in the cryptocurrency world is the Squid Token. Squid token was introduced to the cryptocurrency world last year with the Play to Earn approach. The motto of this project was “Play to earn money!” Its name was also inspired by one of the famous Netflix series; The Squid Game series, which had many fans at that time. So it was quite natural that many people buy this token.
The Squid Token had an impressive growth in its early days. In fact, this token had a price of 1 cent at the beginning of its release. But after some time, it reached a value equal to 3.66 dollars. This upward trend continued until its price reached about 2861 dollars. This price on that date was about twice the value of Ether! That’s why the Squid token became the headline of all crypto publications. It is interesting to know that about 43 thousand people invested in this project! But eventually, after some time passed, it became clear that the apparently valuable Squid tokens could not be sold. Also, its creators disappeared over time and one of the strangest examples of rag money in history happened.
Rug Pull style scam
In a glamorous world like the world of digital currencies, the possibility of massive frauds is high. Rogue money is one of the most common methods of theft in this field. As an active user in this market, you should use all your care and attention when investing. Acquiring enough information, paying attention to the resources and documentation of various projects, paying attention to deceptive advertisements, being self-controlled and using the experiences of the elders in this field can largely prevent the occurrence of various frauds such as rag money.
What is rag money writing? Familiarity with Rug Pull scam in digital currency for the first time on Wallex blog. appeared.