By Laxmikant Khanvilkar
Rugpulls are a notorious scam/hacking tactic used by con artists to lure inexperienced bitcoin investors. The attack continues to be the most common hack for con artists, according to CertiK’s data, with millions of dollars’ worth of crypto assets stolen.
In the evolving cryptocurrency marketplaces, a number of projects present themselves as trustworthy and valuable in an effort to reassure users that they are not scams by requesting smart contract audits, putting timelocks in place, and being open about their team. However, the bad faith efforts continue to astound experts and beginners alike.
A soft rug pull, often referred to as an exit scam, occurs when a fraudster develops a regular crypto token without using a malicious smart contract, then falsely promotes that token in order to steal investors’ money.
Before pulling the rug, exit scammers may have created a misleading marketing website or announced partnerships that don’t exist. Additionally, they make false claims regarding their development team or financial backers. They frequently award themselves token allocations that go well beyond what they publicly claim to hold.
Essentially, they are engaged in wash trading to artificially inflate the token’s volume or price.
To execute a soft rugpull plan, hackers use social media bots to spam positive sentiment about the token on platforms like Twitter, Discord, Reddit, Signal, or Telegram.
When scammers have been caught making false representations like the above, they have been convicted of crimes like money laundering, securities and wire fraud.
Atlanta film producer Ryan Felton, for example, pleaded guilty to twelve counts of wire fraud, ten counts of money laundering, and two counts of securities fraud after executing two 2018 rug pulls —FLiK and CoinSpark.
In above cases, the U.S. prosecutors have shown both their willingness and ability to convict the scammers behind soft rug pulls. The same is expected to become true of hard rug pulls, too.
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