The Most High-Profile Cryptocurrency Crime of 2022
Introduction
As cryptocurrencies become more and more popular, their boundaries are yet to be discovered, it’s no secret that a lot of people will attempt to scam you out of your earnings. A skilled programmer can easily make a lot of tokens for a very cheap price. When combined with a huge audience, they can become very dangerous.
Internet influencers used to only scam their audiences with fake giveaways and workout routines. But ever since the ability to create your own crypto token was made available to the public, it’s been a repeating occurrence.
Pump and Dump
The most common type of scam is the “Pump and dump,” also known as the “rug”. The whole process can be summarized through a couple of steps:
The first step is the influencer creating a token. All they need is for it to look professional and well made. They usually hire someone experienced in coding to develop a system in which the coin can be sold in huge quantities in a short period of time. The developer is in some cases oblivious to the intentions of the influencer and is usually the fall guy for the project.
The next step is marketing. Sometimes they will do a giveaway of the token, but most of the time, the influencer will spam their accounts with promotional content, saying that they either made or found a token that has huge potential and that they personally invested a lot of their own money, so you should too.
At this point, depending on how complex the whole scheme is, other content creators will also jump on board and post on their social media vouching for the token, saying that they are sure that it is the next big crypto opportunity.
They use different schemes of getting you to buy it, sometimes they say it’s for charity, and other times it's their own token that they worked very hard on. This is the most important step, as it directly affects the value of the token.
The next step is to wait. It’s also the easiest step as the influencer watches as the gullible audience buys and pumps the stock of the token, putting their trust in the person they admire and watch on a daily basis.
When the token reaches its peak value, it’s rugged. This means that the creators sell most, if not all, of their tokens, reaping a huge profit, while making the token almost worthless in the process.
Real-life Examples
The most infamous was the “ Save the kids” token which was claimed to be a charity token. It was promoted by members of the FaZe clan, Sommer Ray and Ricegum. Together they have over fifty million followers. A very famous Twitch streamer “Ice Poseidon” openly admitted to rug pulling and making over five hundred thousand dollars off of one crypto scam.
Other examples include celebrities like Kim Kardashian and Logan Paul, professional athletes, and fighters such as Floyd Mayweather. What’s most concerning is that the majority of influencers don’t face any backlash or repercussions by claiming that they also lost a lot of money and are victims just like the fans are.
Some will say that the mass appeal and excitement of the crypto market is the thrill of the unknown. The crypto you bought may crash or it may be the next Bitcoin. However, we can clearly see through the creators’ wallets that there is a pattern of buying a ton of unknown tokens, and suddenly when they are heavily pumped, the stocks drop by at least sixty percent.
Conclusion
In a sense, crypto tokens are a newer version of the stock market so teens and young adults who haven't got the expertise to differentiate between a real opportunity and a scam are unfortunately going to fall victim to the scammers.
A good way to protect yourself from these scams is to look through the histories of the creators of the token, If they have none or have any scam-related controversy, that may be a red flag. Also remember to purchasing cryptocurrencies only on reliable platforms.
Be constantly suspicious and, if it is mentioned that the project is rug-proof, that is a good sign that the project is a pump and dump scheme. It may seem counterintuitive, but more often than not, the coin ends up being a scheme.
The creators will often show a couple of people who got very successful by taking a chance on a crypto token, due to our tendency to look to the few that won. Take examples of the couple out of a million who made it. Use common sense and remember that if it sounds too good to be true, it probably is.