- Blockfence uncovers a massive $32 million rug pull operation involving over 1,300 tokens, affecting 42,000 victims.
- Scammers used innovative techniques, including token supply manipulation and deceptive security measures, to conduct these rug pulls.
Blockfence, a renowned entity in blockchain security, has recently brought to light a staggering rug pull operation that has outsmarted even the most vigilant scam detectors in the cryptocurrency world. This elaborate scheme has not only hoodwinked over 42,000 investors but has also swindled more than $32 million through the creation and manipulation of over 1,300 different tokens.
In this thread, we will provide a detailed explanation of how scammers carry out a series of rug pulls and the deceptive techniques they use to mislead traders while avoiding detection by scam detectors. We also traced some used funds to a well-known exchange.
— Blockfence (@blockfence_io) January 12, 2024
The Anatomy of a Multi-Million Dollar Scam
The scammers initiated their operation by creating thousands of tokens, employing a series of cunning techniques that included the falsification of token maximum supply, token burning mechanisms that targeted users, and infinite minting privileges for admins. Additionally, they created a false sense of security by locking liquidity pool (LP) tokens and renouncing contract ownership, further misleading investors and circumventing traditional scam detection methods.
In a detailed breakdown, the scam starts with the deployment of a fake token using funds transferred from one external account to another. This token, masquerading under the guise of legitimacy, is then manipulated to display a falsified total supply. The scammers strategically renounce the ownership of the token contract, creating a deceptive aura of security and trust.
A pivotal step in this scam involves the scammer’s interaction with decentralized exchanges like Uniswap, where they create liquidity pools using the fake token and Ethereum. By adding substantial liquidity and engaging in wash trading, the scammers artificially inflate the token’s price, luring in unsuspecting investors with the promise of high returns.
The culmination of this scam occurs when the scammers execute a function in a malicious, external contract that drastically reduces the victims’ token balance to a singular unit, effectively rendering their holdings worthless and unsellable. This action, coupled with the withdrawal of liquidity from the pools, leads to the token value plummeting to near zero, sealing the fate of the investors’ funds.
The Elusive Scammers: Cleverly Evading Detection
Blockfence’s investigation highlighted the scammers’ use of novel techniques, such as the renouncement of token contract ownership, which helped them slip past some rug pull detectors that would otherwise flag such malicious activities. This sophisticated approach not only magnified the scale of the scam but also demonstrated the evolving nature of cryptocurrency frauds and the imperative need for advanced detection technologies.
The revelation of this complex rug pull operation by Blockfence underscores the persistent challenges in the cryptocurrency space, where innovative scamming techniques continually evolve. It serves as a stark reminder of the necessity for heightened vigilance and advanced security measures to protect against such deceptive and harmful practices in the digital asset domain.