A train is moving at 100 km/h and it hits you. You were strapped to a train as well. Which was also moving at the same speed before ramming into the first train. The first train could almost be called the hard truth if one takes out the diesel factor. Truth doesn’t run on diesel.
Inside a castle. You’re standing proud. Center of the hall. Walking towards the pomp, elevated throne. Someone pulls the rug from beneath your feet. You fall on your face.
Times were simple when a rug pull signified the poor display of bodily balance in throne rooms.
A cryptocurrency rug pull is symbolically similar to that.
Steps to a rug pull:
- Create a cryptocurrency, generally on an existing blockchain.
- Create hype around it using social media.
- Buy the cryptocurrency with your fiat along with other developers to increase the liquidity.
- Lure people in promising airdrops, giveaways, whatnot.
- Perhaps even do an airdrop just for the sake of it.
- Once more people start to purchase this cryptocurrency with their fiat, improving the liquidity further, pull out all of the money, essentially making the liquidity a bold, curvy 0.
- Don’t bother to even say goodbye, just become a ghost.
Not very easy for developers to do. Time consuming too. But very, very easy for wannabe next “crypto millionaires” — dying of the crushing weight of their responsibility to get in on the next big project quick to make up for lost time and lost opportunities such as buying 1,000 Bitcoins when it was still humanly possible — to fall for.
Don’t be a victim of rug pulls. That’s just … bad.
- These coins are not listed on major exchanges because major exchanges vet all coins before listing them.
- Rug pull scams won’t have a proper website or a whitepaper.
- The developers might be shrouded in mystery. Also, unlike legit projects where developers work tirelessly to make the community lively, these developers might stay AFK for long periods because they simply don’t care.
- The liquidity pool of these coins is not “locked”. Always check this metric. In any good project, the core developers lock the initial liquidity which ensures nobody can run away with the money.
- Even if you have reason to believe that because the project is small, all of the above points aren’t happening at an ideal pace — still don’t buy more than you can afford to lose.
Shady Telegram groups
Telegram is the go-to platform for all cryptocurrency, DeFi, and blockchain projects when it comes to having a group, community, and an announcement channel.
Scammers always piggyback on the reputation of a project.
There are scam groups for nearly all cryptocurrency projects on Telegram. Just search. They have the same logo and name. The admins inside these groups (can be seen via the members list) might also have same names as actual admins from the legit group.
It’s also possible for these groups to have more members than the official group itself, since most of the members are fake profiles.
So, how do you protect yourself?
The scam groups almost always have a promotional sales program which is fake. It can be called many things, but in the end, it’s something like this:
- Pin a message notifying people of the program.
- You have to send cryptocurrency (usually Ethereum) to take part in the program.
- You will receive (not really) double or more as the native cryptocurrency for which the group is (for example, the Cardano scam group promises 1.5x to 3x ADA in return of your ETH’s USD-equivalent value).
- There will be messages and screenshots posted by other (fake) members masquerading as “proof” that they received the promotional money.
All these giveaways or promotions are fake. No legit cryptocurrency has a constant giveaway program. Even new projects don’t have that.
A lot of new members join these scam groups and fall prey to these tactics. Remember, there’s no way to get rich quick.
What can you do?
- Report such groups if you accidentally get into one.
- Only join groups using links on the official website or cryptocurrency pages on exchange websites like CoinGecko or CoinMarketCap.
- If you want to participate in legit airdrops, see CoinMarketCap’s airdrops section.
“Something’s phishy here” websites
Websites that look like they’re phishing websites are, indeed, phishing websites. Apart from that, some websites look particularly legit, advanced, and high-end in terms of features and user interface but are scams.
It’s not possible to document all ingenious ways of scamming people using websites.
Here’s one pretty commonplace example:
- You’re contacted by a stranger, usually on Telegram or Discord, on an ID which you used to join a cryptocurrency group.
- You’re told that you don’t have to deposit anything, but use a coupon code that gives you free cryptocurrency upon signing up.
- You sign up on the website, enter the coupon code, and you actually get some cryptocurrency in your website wallet.
- You’re like, cool! Now you try to withdraw, but there’s a minimum withdrawal limit. So, you’re like why not?
- You deposit more in order to withdraw the free money. Alas, whatever you deposit is also gone.
The money in your website wallet was fake.
Again, there’s no free cryptocurrency out there. At least, there’s no free money that’s this easy to acquire.
Stop looking for quick money.
The first few scams I got involved in included a new meme coin airdrop, a legit-looking exchange website giving you cashbacks, and plenty of “tech support” IDs spamming me upon joining Telegram groups.
I didn’t fall for any, but over time I’ve seen more and more people fall to such tactics.
Use the Scam Alert website to track cryptocurrency scams. You can also submit addresses on this website to double-check them.
Be in the knowhow of how scams are done. Nigerian “princes” emailing you are not the problem anymore. Bitcoin “traders” who can double your investment are.
The golden rule is to believe, firmly, that there’s no free money and no get rich quick scheme out there. You have to work hard to earn money.