Cryptocurrency Scammers Exploit Novel Technique, Swindling Over $32 Million from 42,000 Victims
Summary:
Cryptocurrency fraudsters have swindled over $32 million from over 42,000 victims since April 2023, using a novel method that even fooled some "rug pull detectors," according to blockchain security firm, Blockfence. The swindlers used an innovative strategy that involved counterfeiting the maximum token supply and cleverly switching codes to trick victims. This method has become increasingly prevalent, with Blockfence detecting 1,300 similar cases on Ethereum. Notably, these fraudsters often returned a portion of the scammed currency to avoid suspicion and also renounced token contract ownership to bypass certain detection tools.
Cryptocurrency fraudsters have successfully deceived above 42,000 people, swindling over $32 million since April 2023 using an innovative technique that has duped even some prominent "rug pull detectors," says a blockchain security company. In a cryptocurrency rug-pull scam that mirrors many others, the fraudsters fashion tokens that mirror those of an imminent crypto project, exploiting investor anxiety about missing a promising opportunity.
However, as highlighted in a January 18 report by Blockfence’s security research chief, Pablo Sabbatella, these swindlers used an unusual strategy that included counterfeiting the maximum token supply via minting and burning. They also cleverly switched codes to fool victims and confuse rug pull detectors.
Detailing the method, Sabbatella noted that the con artists first send 10-20 Ether (ETH) to a foreign owned account and then use the funds to create counterfeit tokens. Like many other pull scams, sham liquidity is funneled into the scam project to craft an illusion of genuine volume on Ethereum-based decentralized exchanges like Uniswap.
The fraudster then puts into play a lock() function on the LP tokens, adding to the illusion of security for the investor, assuring them they won't fall victim to a rug pull. Once the fake token's price is inflated via wash trading, the swindler triggers the setUserBalance function, effectively reducing the victim’s token balance to one, which then can't be sold as they have been technically burned. Despite this, the untradeable token continues to appear in the victim's wallet, reinforcing the deception.
Closing off the trick, the fraudster removes the liquidity from the LP, which causes the token value to plummet to almost nil. Surprisingly, the fraudsters then typically return 5-20 ETH from each scam so as to not raise suspicion. In a further twist, the fraudsters strategy includes renouncing ownership of the token contract, a move that can slip past some detector tools.
Blockfence has detected 1,300 individual rug pull cases on Ethereum that have followed this exact pattern. Scammers have even created a "Blockfence token" using this sophisticated method, wherein the fraudster walked away with $53,000 worth of Ethereum. Other tokens copied by scammers include Wisealth, RabbitRun, and DreamFi. In addition to this, the fraudsters have exploited the memecoin trend, using names such as AIPEPE, Purple Pepe, Pepe Chain, Pepe Race, and Baby Pepe.
Blockchain security firm Immunefi has estimated that in 2023 around $103 million was lost due to easily identifiable fraudulent activities like rug pulls.
Published At
1/22/2024 8:36:04 AM
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