Imagine a scam like this... a cryptocurrency project promising investors to crush Bitcoin, and that promise was enough to raise billions of dollars from people around the world, and ended with the mastermind disappearing without a trace.
This is the story of Dr. Ruja Ignatova, now known as the “Lost Queen of Crypto.” She promised people riches through a digital currency called OneChain, but it had no real value and could not be used for anything. The platform they were promised to convert this currency into real cash never materialized, but the money kept flowing into their pockets until the scam was exposed. Today, she is a fugitive, wanted by the FBI as one of its “10 Most Wanted,” and pursued by international authorities.
What Are Cryptocurrency Rug Pulls? And How to Avoid Falling Victim to Them in Meme Coins
The pursuit of quick profits may lead founders to fraudulent operations, such as rug pulls, where developers suddenly withdraw investors' money.
What are rug pull operations?
Rug pulls occur when developers of a cryptocurrency project suddenly withdraw liquidity or funds from the project, causing the value of the coin to collapse and leaving investors with huge losses. These operations are common in small projects or those launched on decentralized exchanges, where new coins can be easily listed without strict oversight.
Types of rug pull operations
Stealing cash
Developers create a new coin and peg it to a major currency like Ethereum on a decentralized exchange. After collecting enough funds from investors, developers suddenly withdraw liquidity, preventing investors from selling their coins and causing the price to crash.
Meerkat Finance Project: In 2021, developers withdrew around $31 million in liquidity one day after the project was launched, initially claiming it was a hack, but later revealed to be a scheme by the developers.
Manipulating orders
Developers manipulate buy and sell orders on trading platforms to create the illusion that there is a high demand for the coin. Investors are lured to buy at high prices, and when buying increases, developers sell large amounts of the coin, causing the price to drop sharply.
Thodex platform:The CEO of the Turkish platform disappeared with investors' money, estimated at around $2 billion, after manipulating orders.Manipulation to raise the price and withdraw funds quickly
Developers are heavily promoting the coin on social media with big promises but no real basis. After the price goes up due to this campaign, developers sell their holdings at the highest price, causing the price to collapse.
OneCoin Project:It was one of the biggest scams, where investors were scammed out of billions of dollars with huge promises of huge returns without any real technology behind the project.
Why target meme coins?
Lack of Real Value: Meme coins often lack clear practical uses, making their value based more on hype and excitement than any real basis.
Community hype: These coins rely on rapid excitement and spread via social media, making them an easy target for scammers who exploit investor enthusiasm.
Ease of creation: Creating a meme coin does not require much effort, allowing scammers to quickly launch and promote new coins without much oversight.
Anonymous development teams: These projects are often led by anonymous teams, allowing them to easily disappear after raising money.
How to Avoid Being a Victim of Rug Pulling
To protect yourself from these scams, it is essential to do thorough research before investing. Here are some tips:
Check the project team... Make sure the team members are known and have a reliable history in the field. If the team is anonymous, that's a red flag.
Check code transparency... Make sure your project's code is publicly available and has been independently audited. Unavailable or obscure code can be a sign of problems.
Review the coin's use and distribution... Make sure the coin has clear uses and that its distribution is not overly concentrated among a few wallets.
Follow the community... Check out community discussions and project interaction with investors.
