The Thodex Rug Pull Scheme

The alleged Thodex rug pull scheme made waves in the world of crypto back when it first happened. This scandal was one of the largest rug pulls in crypto history and led to the arrest of many Thodex officials, including the company’s founder.

Are you wondering what happened? Read on to learn all about the Thodex Rug Pull scheme and the masterminds behind the criminal act.

What is Thodex?

Thodex was a cryptocurrency exchange based out of Turkey. The company was founded by Faruk Fatih Ozer in 2017, although at the time of founding it went by the name of Koineks, at the time, it was one of the first cryptocurrency exchanges to be founded in Turkey. It was not until 2020 that Koineks changed their name to Thodex.

Thodex had a habit of utilizing all types of rewards programs as a way to bring in new users to their platform. Many of these stunts consisted of rewarding certain members with free tokens every time a specified amount of users joined the program. A reward program like this revolving around Dogecoin occurred shortly before the Thodex hack. These programs boosted the number of users on the platform just in time for the people behind the platform to put their scheme into action.

What Was the Thodex Hack?

In April of 2021, Thodex closed their platform off to investors. The company said that this offline period was due to abnormal behavior in company accounts, and users were unable to access their funds. The company stated that users' funds were safe and that the extreme measures were simply being taken to secure the company against cyber-attacks.

Quickly after this, local media began to report that Ozer, founder of Thodex, had fled the country with a vast sum of money, suspected to be made up of investor’s funds, in tow. Ozer had reportedly fled to Albania with the stolen money.

This was of course a major news story, as Thodex had been trading around 585 million dollars in cryptocurrency before Ozer shut the platform down. The exchange also had a usership base of around 400,000 people, most of whom were considered to be active on the platform. Ozer was eventually caught and arrested in Albania, as he was placed on a wanted list the moment he left Turkey.

What is a Rug Pull Scheme?

Rug pull schemes occur when a crypto company pushes and pumps up the overall price of their new coin that they have put in the market. Doing so allows them to draw all sorts of new eyes to the coin and raises the price per coin.

However, after inflating the price of their new coin, the team responsible for creating it will take out as much value as they can from the token, before abandoning it completely. These rug pull schemes allow individuals to generate a great deal of money in a short period of time, while also leaving investors with a token that is worthless.

Was the Thodex situation a rug pull scheme? It certainly seems that way. Thodex prevented investors from accessing their funds by taking their platform offline. This allowed Ozer to exit with the stolen funds. This act severely damaged investors using Thodex, and the company itself was damaged as well, as Thodex is now defunct.

How to Avoid Crypto Rug Pull Schemes

It can, at times, be difficult to navigate the world of cryptocurrency and determine what is a rug pull scheme, and what is not. While all rug pulls have the same general purpose, there are many different ways that coin creators can go about executing one.

Liquidity stealing is one method of rug pulling. Liquidity stealing occurs when a coin creator withdraws all of their created coins from the liquidity pool. Doing so can remove almost all of the value from the coin, rendering it worthless for investors. This is one of the most common rug pull schemes seen today. 

Limiting sell orders is yet another way to execute a rug pull scheme. In this scenario, a token developer will develop their token in a way that only allows them, the developer, to sell the token. These creators will then wait for other investors to purchase their tokens with paired currencies (two currencies paired together for trading). Following this, token creators get rid of the tokens they have, once again leaving other investors with a worthless token.

All of these methods are common ways to put a rug pull scheme together, but for some it may be difficult to spot these schemes before they are enacted and you are left holding an empty bag.

There are warning signs, however, that can be used to avoid cryptocurrency scams. They are as follows.

Unknown Developer

If a token developer is relatively unknown, or even anonymous, it could be a sign of a pending rug pull scheme. While not every anonymous or unknown crypto developer is out to scam potential investors, unknown creators can pose a bigger risk to investors than token creators with a known and stable track record.

No Liquidity Lock

No liquidity lock on a token could also signal a rug pull scheme. Liquidity locks help prevent token creators from taking all of the project’s liquidity and exiting with it, leaving other investors with nothing. A token with no liquidity lock has a very high chance of being part of a rug pull scheme. 

Suspiciously High Yields

Another simple but common warning sign is yields that are suspiciously high for a token. These crazy high yields usually sound too good to be true, and they often are. Many times, tokens with high yields come coupled with high risks for investors as well.

The Thodex Rug Pull Scheme was a prime example of just how damaging these schemes can be to investors. An incident like this is just another reason why investors should always do their research when investing in tokens. Don’t let this discourage you however, because if know what to look out for and what to avoid, it’s fairly easy to protect yourself from a potential rug pull scheme when investing in cryptocurrencies.

This article was brought to you by the MintDice Bitcoin Casino. Originally posted to the MintDice Crypto Blog.