May 29, 2024
Scammers Deceptive Tactics Rug-Pulling 42K Victims
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Scammers’ Deceptive Tactics: Rug-Pulling 42K Victims

A blockchain security firm has uncovered a new method employed by cryptocurrency scammers, resulting in over $32 million defrauded from more than 42,000 victims since April 2023. The novel approach has even managed to deceive some of the industry’s “rug pull detectors.” Pablo Sabbatella, Head of Security Research at Blockfence, detailed the distinctive technique used by the scammers in a report on January 18.

Typically, cryptocurrency rug-pull scams involve the creation of tokens that impersonate a soon-to-be-launched crypto project, exploiting FOMO (fear of missing out) to attract investors. In this case, the scammers utilized a unique method that manipulated the maximum token supply through minting and burning, coupled with a code bait-and-switch tactic that outsmarted rug-pull detectors. Sabbatella explained the scammer’s process, which begins by sending 10–20 Ether (ETH), valued at around $2,400, to an externally owned account.

These funds are then utilized to generate fake tokens. Like traditional rug-pull scams, fake liquidity is injected into the fraudulent project, creating the appearance of legitimate volume in liquidity pools on decentralized exchanges such as Uniswap. To further deceive investors, the scammer implements a lock() function on the LP tokens, giving the illusion of protection against rug pulls.

After artificially inflating the price of the fake token through wash trading, the scammer activates the setUserBalance function, updating the victim’s token balance to “1” and technically burning the token, making it impossible to sell. Despite this, the token remains visible in the victim’s wallet. The final step involves the scammer removing liquidity from the LP, causing the token value to plummet to nearly zero.

Interestingly, the scammers return 5–20 ETH from each scam to avoid drawing too much attention. Additionally, the scammer renounces ownership of the token contract, further complicating detection by some tools.

“By doing this, the victims buying the token are misled, as some rug pull detectors even miss and mark this token as ‘safe.’”

Blockfence has identified 1,300 separate incidents of rug pulls on Ethereum following this pattern. Sabbatella highlighted a specific case where a scammer created a “Blockfence token” using these sophisticated techniques, walking away with 23.6 ETH worth $53,000.

Other tokens impersonated by scammers include Wisealth, RabbitRun, and DreamFi. In a trend leveraging the popularity of memecoins, scammers have created tokens with names like AIPEPE, Purple Pepe, Pepe Chain, Pepe Race, and Baby Pepe. Sabbatella added that about $103 million was lost in 2023 due to identifiable fraud schemes, such as rug pulls, according to blockchain security platform Immunefi.

Image By frimufilms

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