Beware of complex scams and carpet scams, because the target of the mob is cryptocurrency users

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As far as the cryptocurrency field is concerned, this year is a landmark year Mainstream adoption. Recently Report A report issued by Grayscale Investments found that more than A quarter of U.S. investors (26%) surveyed their Bitcoin (Bitcoin), higher than 23% in 2020.As the holidays approach, financial service provider MagnifyMoney also Established Nearly two-thirds of Americans surveyed hope to receive cryptocurrency as a gift this year.

Although the growth of encryption is significant, the number of scams related to digital assets has also increased.Chain analysis Blog post Emphasize that the company’s “2022 Cryptocurrency Crime Report” shows that fraud is the main form of cryptocurrency-based crime this year in terms of transaction volume. The post pointed out that the world has taken away more than $7.7 billion worth of cryptocurrency from fraud victims. According to Chainalysis’s previous research, this number has increased by 81% compared to 2020, and fraud activities this year have dropped significantly compared to 2019.

Source: Chain Analysis

Scams are the biggest threat to building trust in cryptocurrencies

Chainalysis research director Kim Grauer told Cointelegraph that although there are many different encryption-related crimes, fraud has become the biggest crime in terms of the value that criminals get. She added that scams pose a major threat to building trust within the crypto ecosystem because it may prevent people from investing in digital assets.

Grauer further mentioned that scams related to decentralized finance (DeFi) are on the rise this year.and The annual revenue of all DeFi agreements is estimated to be approximately US$5 billion, This should not be surprising. However, what’s more interesting is that Chainalsyis found that “Carpet pull“Contributed to the increase in fraudulent revenue this year. According to Grauer, Chainalysis defines rug pull as a situation where a person or developer decides to stop the project unexpectedly and escape with funds:

“Carpet pull has accelerated the number of scams in the cryptocurrency field this year. In addition to financial fraud, carpet pull has also exploited different vulnerabilities in the crypto field. In total, they have taken away $2.8 billion in cryptocurrency.”

Although carpet pulling is a relatively new crime, Grauer believes that these cases are becoming more common in the evolving DeFi ecosystem. Chainalysis’s blog post points out that from this perspective, “carpet pull has become the preferred scam of the DeFi ecosystem, accounting for 37% of all cryptocurrency scam revenues in 2021 and only 1% in 2020.”

The Chainalysis blog post also provides examples of some of the biggest carpet pulls in 2021.For example, the AnubisDAO case is mentioned as The second largest carpet pull this year, Cryptocurrency worth more than 58 million U.S. dollars was stolen. According to the post, AnubisDAO was launched on October 28, 2021, claiming to provide a decentralized currency backed by multiple assets. However, the project does not contain a website or white paper, and all developers use aliases. The magic is that AnubisDAO still raised nearly 60 million U.S. dollars overnight, but after 20 hours, all these funds disappeared from AnubisDAO’s liquidity pool.

Although AnubisDAO demonstrated a large-scale DeFi carpet pull, new cases occur almost every day. An early Ethereum and DeFi investor who wished to remain anonymous told Cointelegraph that they became victims of the carpet pull on December 19, 2021. An anonymous source shared that the project was called “up1.network” and pointed out that many early Ethereum investors discussed Up1 in the Discord chat group. They added:

“Someone I trust mentioned this project, so I checked it. I thought it was strange to see Up1 giving away airdrops, but thought it might be related to the DeFi tokens I own. Then I connected my MetaMask wallet and clicked “Get the airdrop,” but I keep getting an error message. I did this 3 times and it allowed the project to access my account.”

Unfortunately, as soon as Up1 gained access to their account, three DeFi tokens worth $50,000 were immediately taken away. “I revoked access on Etherscan afterwards, so they couldn’t steal more tokens,” they mentioned. Ethereum investors then checked the DeFi platform Zerion, where they saw a notification that the DeFi tokens had left their wallets. Zerion also provided them with the wallet address where the funds went, and a message:

“0xc28a580acc42294787f44cffbaa788eaa4958056; You let the web3 site/smart contract have unlimited access to your funds (check who you grant access and revoke here).”

Although both AnubisDAO and Up1 are examples of DeFi rug pull, it is important to point out that the non-fungible token (NFT) ecosystem is also vulnerable to rug pull.Recently, the Boring Ape Yacht Club When some members decided to connect their wallets to the minted NFT via a link posted in the organization’s Discord channel, the community became a victim of a carpet pull.

Even more surprising is that carpet scams also target mainstream NFT projects.For example, on October 28, 2021, Miss Universe Global Beauty Pageant issued an official tweet Announced the launch of its NFT on the Wax blockchain. Unfortunately, the people who mint these non-fungible tokens are part of the carpet pull.

NFT photographer Jessica Yang told Cointelegraph that when Miss Universe announced the launch of the NFT project, she did not question whether it was a scam, because the pageant was widely known. “The price of each NFT is 0.06 Ethereum. This is equivalent to about $230. The artwork also has the faces of the beauty contestants and the countries related to them,” she commented.

Yang also mentioned that the project is aimed at women, and pointed out that Miss Universe President Paula Shugart had previously statement:

“Miss Universe will become the first brand in the NFT field about women, women’s empowerment, embracing technology and moving forward. I like it; this is the first one that is far from other more male-oriented spaces.”

In view of the brand’s reputation and appeal, Yang and many others coined the Miss Universe NFT to connect their wallets to the platform. However, Yang pointed out that Miss Universe deleted her official Instagram account the next day. Then she noticed that her funds had completely disappeared. Yang added:

“One of the red flags I saw came from their Discord. The moderators have been trying to get everyone to buy Miss Universe NFT and promised that they will follow the roadmap. Their roadmap promises monthly AMA, signature printing, etc. Even Steve Harvey reviewed the project.”

Do your own research

As the DeFi and NFT ecosystems continue to mature and develop, unfortunately, these environments are prone to scams before industry solutions are developed. At the same time, the best approach is to let users do their own research.

For example, Grauer shared that every DeFi project should have an available code audit to make investors feel safer. “Many DeFi platforms that have been hacked do not have code audits,” she commented. Chainalysis’s blog post also pointed out that “carpet pull is very common in DeFi, because you have the right technical knowledge to create new tokens on the Ethereum blockchain or other blockchains and make them available on decentralized exchanges. (DEX) go public without code audit.”

In addition to the code audit, anonymous Ethereum investors shared that after checking the Up1 website more closely, they could see that it was fake. “For example, the team is anonymous, only the name, you can’t click to open Twitter or LinkedIn personal information.” Even after taking these precautions, anonymous sources mentioned that wallet providers need to better protect the safety of users:

“If there is a problematic website, the wallet should find them. I believe this technology can be scaled, but it must be able to deal with these scams. Otherwise, people will lose all their money.”

After Up1 rug pull, anonymous sources contacted MetaMask and shared that they got a response, stating that it would flag the site.

It is also important to point out that although a clear industry solution has not yet been developed, Grauer points out that unlike statutory related crimes, encrypted payments can be traced back to their source. With this in mind, she added that some cryptocurrency platforms are beginning to take action to protect users from fraud.

For example, the cryptocurrency exchange Luno will cooperate with Chainalysis in 2020 to prevent fraud South African encrypted usersEva Crouwel, Luno’s director of financial crime, told Cointelegraph that from a regulatory framework perspective, one of the requirements is to be able to monitor and take action on suspected money laundering, terrorist financing, sanctions, or any other type of transaction. Illegal activities. She pointed out that on-chain transactions must be monitored, as well as case management and user interface design and development.

In terms of protecting themselves from scams for crypto investors, Crouwel recommends staying away from quotes that sound too good to be true, adding:

“First, do as much due diligence as possible. Check the company/token’s social media profile to understand the experience of other users. You should also browse the company’s director’s personal social media page to understand their industry relationships and employment background to ensure Their history is reliable.”