Crypto Currency: “We fooled you guys and you can’t do shit about it,” a crypto finance enterprise called DeFi100 wrote on its website on May 22nd. HA HA , All of you moon boys have been conned, and there’s nothing you can do about it.”
Screenshots of the post went popular on crypto Twitter almost instantly (always anarchic, easily visible). Mr. Whale, a renowned anonymous crypto-tracking Twitter account, said DeFi100 had made off with $32 million. The data was picked up by cryptocurrency news outlets as well as Yahoo Finance. The project’s proprietors denied any wrongdoing, and it was soon evident that the message was a website hack rather than a real warning – but it was too late by then. Panic had set in, and the underlying coin’s price was plummeting.
“We never stole any funds,” a project official told The Verge. “DeFi100 was a very tiny initiative, and we did not keep any investor monies, so there was no risk of individuals being scammed or their money being stolen.”
The issues with DeFi100 are only a minor portion of the story, but they serve as a reminder of the risks associated with the current crypto boom. Despite the fact that billions of dollars have been poured into space in recent months, there is still limited remedy if investments turn out to be frauds.
Most crucially, the blockchain’s unprecedented decentralization means there’s no way to get your money back — and little guarantees that an unknown vendor will follow through on their claims once the transaction is completed. As speculators seek increasingly more obscure chances and riskier bets, the outcome is a new gold rush in crypto frauds.
The website for the DeFi100 project has been restored, but rumors about what happened to remain. Certik, a famous blockchain security leaderboard, now lists DeFi100 as a “rug pull,” a euphemism for a scam in which the project’s founders gather money and then disappear. (The project’s owners claim that pulling the rug out from under them is impossible because they have never held investor monies.) It’s just one of a slew of frauds that crypto investors should be aware of, including shady cryptocurrencies, Discord pump-and-dumps, Elon Musk impersonators, and other sorts of cybercrime.
Bad investments, collapsing projects, and outright scams, according to Maren Altman, a TikTok celebrity with over a million followers who publishes videos on cryptocurrencies and astrology, are three types of danger that crypto investors should be careful of.
Simple bad investments in obscure coins are the first and most typical type of risk. Aside from the big names like Bitcoin and Ethereum, there are millions of smaller coins based on blockchain technology that promise large rewards if they gain popularity. Accusations of “scam coins” abound on subreddits like r/cryptocurrency.
“I mean, I’m in a couple of situations myself, where the investment was a promise, the development didn’t go through, and I’m still waiting,” she explained.
For beginner traders, researching esoteric altcoins can be confusing. On Twitter, links to cryptocurrency Discord servers frequently appear, promising a simple pump-and-dump of a lesser crypto coin. Alternatively, Twitter bots will accuse non-existent Discord servers of pump-and-dump schemes in order to boost the value of a different cryptocurrency. However, while they advertise easy money, the reality is far less appealing.
Another danger is the inadvertent yet costly mishandling of cash. In a bullish cryptocurrency market, everyone believes they have a revolutionary cryptocurrency idea. And, unsurprisingly, many of them fail.
“Things not being clarified, contract problems, or just a weak link in the development circle,” Altman added, “leading to money being mismanaged and people’s investments not turning out as expected.”
The DAO project is one of the most well-known examples of this. It debuted to much excitement in the spring of 2016, only to be utterly defunct by the fall of the same year. The Decentralized Autonomous Organization established the initiative as an attempt to create a venture capital fund on the Ethereum network. A hacker discovered a hole in the token’s coding and made off with $50 million after only a month or two. Traders began selling DAO tokens in large quantities, and the price never recovered.
This may result in flagrant fraud in some cases. Crypto-based financial scams are at an all-time high, according to the Federal Trade Commission, thanks to the growing interest in bitcoin. The distinction between a well-intentioned gaffe and a crypto Ponzi scheme is also hazy. Just ask OneCoin or PayCoin investors.
OneCoin was promoted as an instructional crypto trading service when it first started in the mid-2010s. It turns out that the OneCoin tokens that investors bought weren’t truly on the blockchain. It was accused of being a Ponzi scheme, and the company’s founders walked away with about $4 billion. It’s been dubbed “one of the greatest financial con jobs in history.” Ruja Ignatova, one of the group’s founders, is still missing.
Homero Joshua Garza, the founder of PayCoin, was sentenced to 21 months in prison and ordered to pay reparations in 2019 after creating his own cryptocurrency and promising investors a $100 million reserve of money. There was no reserve, and the project lost $9 million in total.
Despite the fact that huge cryptocurrencies like Bitcoin and Ethereum witnessed a significant drop in value in May 2021, cryptocurrency is more popular than ever, and legions of naive traders are learning the hard way what a peer-to-peer financial service actually entails.
According to Neeraj Agrawal, director of communications at Coin Center, one of the largest cryptocurrency advocacy groups in the United States, outrageously speculative currencies (also known as “shitcoins”) have become a permanent component of the cryptocurrency world.
“The irrational speculative garbage coins aren’t going away,” says Agrawal. “It’s just a part of life now. And it’s up to us to demonstrate that the truly excellent efforts are worthwhile, that there is real value here.”
That’s especially difficult when crypto celebrities like Elon Musk are attracting attention to the wackier end of the market. Musk recently inspired a large surge in interest in Dogecoin, a failing crypto currency named after the famous Shiba Inu meme and created as a joke. Musk’s comments have also been blamed for the huge market drop that occurred earlier this month. Although it’s unknown what impact Musk has on the industry, his recent branding as the face of cryptocurrency has resulted in a slew of Musk-themed frauds. According to the Federal Trade Commission, fraudsters mimicking Musk have defrauded traders out of at least $2 million this year.
Perhaps the greatest risk to crypto users is their own stupidity,” remarked Meltem Demirors, chief strategy officer of digital asset investing business CoinShares. “I believe individuals are simply unaccustomed to taking charge of their financial lives.”
This month, I was asked about an obscure cryptocurrency called Dogelon Mars by both a family member and a close acquaintance. It’s presently worth $0.00000016 USD, but two individuals close to me were considering buying a bunch of it since they mistookly assumed it was a cryptocurrency released by Musk himself, based on the name and its baffling description.
Dogelon Mars was one of Demirors’ favorite meme currencies, she told The Verge. “We have to remember, right, that permission-less financial innovation is the fundamental objective of a lot of this,” she continues. “And a market only necessitates two things. It necessitates the presence of both a seller and a buyer.”
She claimed that this was the primary cause of the recent NFT explosion. People who had crypto coins wanted to see what they could do with them. It turned out that they were looking to spend millions of dollars on bizarre online art.
“I always find it amusing when individuals are all about crypto and permission-less financial innovation, but the minute they lose money, they turn into the most statist individuals you can imagine,” Demirors added. “You can’t have it both ways,” says the narrator. As if you purchased this shitcoin. You must now prepare your bed and lie down in it.”