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Decentralized finance (DeFi) is a rapidly growing sector in the global financial market. As their use increases, so does the potential for scams. One of the most popular scams is called ‘Rug pulls’ and it can be incredibly damaging if not avoided. These scams, which involve the sudden and unexpected withdrawal of funds from an investment, have cost investors millions of dollars.
In this blog post we will look at what a carpet pull is, how to identify it and how to protect yourself from it. We will also talk about some DeFi like FROSTIES NFT, RING Financial, CHAIN LINK and explain to you whether they were honest projects or Rug Pulls.
What is a carpet pull?
A ruk is a kind of scam in the cryptocurrency market. This usually involves a team of developers creating a project with a white paper and token offering, only to “pull the rug” from investors by disappearing with the proceeds of the sale. This is a type of exit scam, where the developers take the money and run.
It’s becoming increasingly common, with reports of dozens of back pulls occurring in the past year alone. This is a big problem for the crypto industry as it undermines confidence in the sector and can lead to significant financial losses for investors.
Carpet rugs can have a devastating impact on sign holders. Not only can you lose the money you invested, but you can also be left with products or tokens that have no real value. This can be especially harmful if you have invested a significant amount of money in the project.
Additionally, pullbacks can have a negative impact on the entire cryptocurrency market. This can lead to a decrease in confidence in the sector and make it more difficult for legitimate projects to get financing.
How do Crypto Backpack Treks work?
The term “pullback” is derived from the literal image of a rug being pulled out from under one’s feet, suggesting that investors have been tricked into investing in a project that will never succeed. This type of scam is especially dangerous for those who invest without due diligence, as it is often difficult to detect until it is too late.
Crypto withdrawals can take many forms, from limited time offering (LTO) scams to pump-and-dump schemes and abandonment scams. In an LTO scam, the project team will offer a limited amount of tokens at a highly discounted rate, claiming that they will be worth much more in the future. They will then exit the project with the funds, leaving investors with nothing.
Pump and dump schemes are another popular form of crypto carpet pulling, where the project team will artificially inflate the price of the tokens by heavily promoting them and buying them back periodically. This is done to attract more investors and to give the team an opportunity to sell their tokens at an even higher price.
Exit scams are the last type of crypto retreat, where the project team will suddenly leave the project with the funds they have raised, usually without any warning. This is done to avoid any legal recourse and to protect their own funds.
No matter the form, crypto rug pulls can be devastating for those who have invested. It is important to do thorough research before investing in any project, and to remain wary of any project that is not open and transparent about its team and its operations.
Signs of a Crypto Rug Pull Scam
The best way to avoid a carpet pull is to be able to identify it. Here are some of the most common signs of a carpet leak:
The project has no real use case or application. The team has a history of kickbacks or scams. The team is anonymous or changes frequently. The project is uploaded on social media with little or no substance. The project has no open source code or documentation. The project has an exceptionally high circulating supply. The project has multiple token lists with no real use case.
If you see any of these signs, it is best to avoid investing in the project.
Was FROSTIES NFT a scam?
The infamous Frosties carpet pull was a classic example of a carpet pull with devastating effects. Frosties were a collection of colorful, animated ice cream-inspired characters in the fun, light-hearted vein of Doodles. The collection dropped on January 9, 2022, when the Frosties Discord server disappeared next to the original project’s Twitter profile, after briefly posting the message, “I’m sorry.”
The Frosties scam resulted in the theft of at least $1.2 million, which was moved in a series of rapid transfers of funds from Frosties’ OpenSea wallet to other accounts, which at its peak numbered around 40,000 left stunned.
Other research has also mentioned that large transfers have also occurred. This time, the scammer used Tornado Cash, an Ethereum-based tool that obfuscates the source of funds using stealth addresses.
Was CHAIN LINK a scam?
In 2017, Sergey Nazarov and Steve Ellis created Chainlink. At its core, the project serves as a “bridge” between a blockchain and off-blockchain environments.
It is a decentralized oracle network that provides real data to smart contracts on the blockchain. Smart contracts are predefined agreements on the blockchain that evaluate information and execute automatically when certain conditions are met. LINK tokens are the digital asset token used to pay for services on the network.
Chainlink can facilitate secure communication between Ethereum projects and various off-chain data. Because Chainlink’s LINK token is built on the Ethereum platform, LINK complies with the Ethereum platform’s protocols.
But due to the very pronounced volatility and weakness of altcoins, the project fell apart. Rumors circulated that the project was a scam, but it was clear that it was not a carpet pull.
Now let’s talk about another project that wasn’t a Back Pull, but instead fell victim to a hacker.
What happened to RING Financial?
Before we explain how RING Financial was unfairly accused of being a scam and a Back Pull, let’s first see how RING Financial became one of the top DeFis with their project.
RING Financial was meant to be the ideal solution so sought after by crypto enthusiasts. It was the all-in-one platform that wanted to make cryptocurrencies more accessible. With RING Financial, you no longer have to waste time searching for the best siptos on the market yourself before making any token purchase.
RING Financial’s algorithms would take care of everything. It is important to note that RING Financial has grown at an unprecedented rate and pays its subscribers daily. This is completely contrary to the sneaky techniques of Back pulls.
As RING Financial became more and more popular, the other DeFis that were its direct competitors began to lose their prospects. This clearly began to attract hackers who began looking for loopholes in the smart contract to commit scams against RING Financial.
This is how a hacker was able to use a loophole to commit fraud on December 5, 2021 between 14:01 and 14:06. It might surprise you, but it only took 5 minutes for the hacker to carry out the crime against RING Financial.
We were able to get all this information because of the blockchain scanner that was able to store the information about the transactions made with RING Financial. We were even able to get the links of the deals. You can check them out here.
Wallet executes transaction for hack exploit: 0xfe58c9e2ecb95757be6f4bca33162cfa346cc34f
Ring smart contract address: 0x521ef54063148e5f15f18b9631426175cee23de2
Ring Reward Pool Address: 0xa46cc87eca075c5ae387b86867aa3ee4cb397372
Transaction hack exploit:
TRX 1
link: https://bscscan.com/tx/0x596d38494ea5ae640b2a556a7029692928f15713d22b5948477c4eb4a92cf68e
TRX 2
link: https://bscscan.com/tx/0xfc890c855709bb6aeb5177ee31e08751561344402a88af13e7dfd02b9a2f6003
TRX 3
link: https://bscscan.com/tx/0x35c2f1ed9c5ce13a714af6c0dcbbce8fe720f7d6212232b6dd3657d8799a10f1
From all the above we can conclude that RING Financial was not a smooth ride. What really happened is that RING Financial was instead a victim of the weakness of smart contracts. Indeed, a hacker has used this to commit scams and fraud. Which resulted in the crypto
community accuses RING Financial of being a scam.
Tips to stay safe in the crypto market
Here are some tips to stay safe in the crypto market:
Only invest what you can afford to lose. Do your research. Research the project and the team behind it. Join official Telegram or Discord groups and ask questions. Look for signs of active development, such as working code and continuous updates. Be aware of the different types of carpet pulls and be on the lookout for any suspicious activity. If in doubt, avoid investing in the project. Diversify your investments. Don’t invest based on hype or FOMO (fear of missing out). Use trusted wallets and purses. Don’t blindly trust anyone or anything.
Pullbacks can have a significant impact on the crypto market. They undermine confidence in the sector and can lead to significant financial losses for Noders, as we have seen with RING Financial. They also make it harder for legitimate projects to get funding, as token holders become more cautious about investing in new projects. It is important to understand what a withdrawal scam is and how to identify it. By following the tips in this blog post, you can protect yourself from kickbacks and stay safe in the crypto market.
*This article is paid. Cryptonomist did not write the article or test the platform.
Disclaimer for Uncirculars, with a Touch of Personality:
While we love diving into the exciting world of crypto here at Uncirculars, remember that this post, and all our content, is purely for your information and exploration. Think of it as your crypto compass, pointing you in the right direction to do your own research and make informed decisions.
No legal, tax, investment, or financial advice should be inferred from these pixels. We’re not fortune tellers or stockbrokers, just passionate crypto enthusiasts sharing our knowledge.
And just like that rollercoaster ride in your favorite DeFi protocol, past performance isn’t a guarantee of future thrills. The value of crypto assets can be as unpredictable as a moon landing, so buckle up and do your due diligence before taking the plunge.
Ultimately, any crypto adventure you embark on is yours alone. We’re just happy to be your crypto companion, cheering you on from the sidelines (and maybe sharing some snacks along the way). So research, explore, and remember, with a little knowledge and a lot of curiosity, you can navigate the crypto cosmos like a pro!
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