«carpet cover“Crypto fraud is a well-documented phenomenon now, aided by the unregulated innovations in cryptocurrency and decentralized finance (DeFi). These scams come in a few varieties, but they all end the same way: the project’s team disappears with everyone’s crypto.
Crypto scams are not new and they come in many forms, such as phishing attacks targeting crypto users,”pump and drain” Scams, Crypto Driven Ponzi Schemes, Tokens With “back door“code that shuts down victims’ ability to sell,”CryptoRoom” catfishing cryptocurrency scams, and many more elaborate scams that prey on naive crypto investors. What’s worse, even celebrities are paid to endorse cryptocurrencies they know little or nothing about, which they (almost) always regret later, and it’s guaranteed that any popular movie or series will create a scam coin to drive their hype to the moon, such as the MANDO cryptocurrency scam that capitalized on the popularity of The Mandalorian.Despite the fact that anyone who has experienced crypto is painfully aware of the warning signs of a scam, people new to crypto have no idea how easy they are to set up and take down or what the warning signs are.
Carpet sweeps are among the most iconic crypto scams. As CoinTelegraph discusses, rye moves are often facilitated using blockchain smart contracts and DeFi-specific innovations, particularly Decentralized Exchange (DEX) liquidity pools. Since a fraudster cannot get their token listed on reputable exchanges like Coinbase, they must rely on unregulated DEXs like Uniswap to list their coins instead, and to do so they must deposit their token’s supply into a “liquidity pool” so that people can exchange legitimate cryptocurrencies for it. From there, they convince people to buy their token on the DEX, and when they are ready to “pull the rug” they draw all the liquidity from the pool, which is then loaded with more legitimate cryptocurrencies than scam coins. This sends the scam coin’s price to zero, creating “carpet cover” chart formation: a long, red candlestick going to near zero.
The Rug Pull Warning Sign
There are several major warning signs of a crypto scam, the highest of which is founder anonymity. If the team behind the project never reveals its true identity, then that’s a massive red flag that shouldn’t be ignored. Anonymous founders”rough” their community has become such a problem now that a project run by an anonymous team is automatically written off as illegitimate until proven otherwise. Two red flags that require more knowledge to look for are the absence of smart contract security audits and the team not uploading and verifying the smart contract’s code on a block explorer like Etherscan, as both could be attempts to hide the code’s functionality from other developers.
Two additional red flags that almost guarantee a blanket pull involve the team using social media and private chat servers to pump the price of their cryptocurrency, and/or creating an app that requires users to deposit crypto/NFTs to earn incredibly high yield. An example of the first condition was the Squid Game crypto scam, which is a typical “pump and drain” variant of carpet-moving fraud. For the second condition, Crypto daily reported on the recent SudoRare scam, which used a malicious NFT marketplace app copied from the Github repositories of SudoSwap and SoRare to pull their community 6 hours into the app’s operation, making off with $820,000 in crypto after scrubbed the internet of everyone immediately. their accounts.
Although it is impossible to know for sure which projects are scams and which are legitimate until after the curtain is drawn, it is not difficult to spot the warning signs. Projects with anonymous teams should be viewed with great suspicion, especially those that pump their cryptocurrency and/or that build a platform that promises high returns for crypto deposits. The DeFi the industry has extensive experience with carpet covering scams, so understanding how they work can help you avoid becoming robust.
Source: CoinTelegraph, Crypto Daily
