Carpet covers explained in under 400 words
A blanket sweep is a specific type of scam in the NFT world. It happens when the developers of an NFT project maliciously lure in a community of investors and then quickly abandon the project, making off with the money in the process. This can happen when the founders steal project funds after launching the project, but also if they sell off their pre-mined holdings.
In either case, it’s a way to extract money from the community, leaving investors with an NFT that has no utility or community behind it, and sometimes no NFT.
But there are only two types of carpet covers: hard and soft, and only one of them is illegal.
Hard hacking is when developers use the coding in the NFT project’s smart contract to steal investors’ funds. This type of contract can lock investors into a digital asset with no use or a project without direction. Such blanket moves are illegal, as the code serves as evidence of developers’ intent to defraud their investors.
Soft carpet covers are not illegal, and this arguably makes them creepier. The smart contract code is not designed to defraud investors, but developers can still dump their assets without warning, devaluing NFTs in the blink of an eye. Over the past few years, several rug pulls have caused an NFT project’s Discord, website, Twitter, and everything else to disappear just minutes after the project was launched. Developers may have promised their community a roadmap, charitable donations, and many other things. Still, if they dump the project and run off with the money, it’s not technically illegal.
Scams are now a well-known phenomenon in the NFT community, and more and more people are increasingly aware of how to detect and stay away from projects they think are likely to do this. The infamous move has also drawn attention from regulatory bodies such as the Ministry of Justice and the Securities and Exchange Commission.
Indeed, after a two-month investigation on March 24, 2022, prosecutors from the Southern District of New York arrested and charged the founders of the infamous Frosties NFT project with conspiracy to commit fraud, in addition to conspiracy to commit money laundering, after they drew the local community to the tune of $1.3 million. Such lawsuits can deter potential fraudsters.
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