Hackers are Manipulating Smart Contracts for Crypto 'Rug Pull' Scams, Researchers Say

New research suggests that crypto scams are getting worse. One popular strategy is the token "rug pull," where malicious actors fake hype over a crypto coin, abandon the project halfway, and steal all the investors' money.

Sources from ZDNet noted that last year featured record-breaking numbers for cryptocurrency-related theft and fraud, where cybercriminals netted an estimate of $14 billion. 

Be warned that these crypto scam strategies continue to worsen, and the rug pull is one of the biggest contributors to their success.

Squid Game Crypto Scam

The SQUID token is one of the best examples of this malicious scam. When enough fans had gotten interested in the coin and it peaked at $2,850, developers' rug pulled the coin and prevented traders from selling it. The coin crashed 99.99 percent and ended with $0.0007 last year. The scammers stole millions of dollars in the process.

Notably, the pattern primarily used in rug pulls is to generate hype on a crypto coin with a fake value. Then, scammers will steal the money in the money invested in the fake project.

Experts from Check Point Research (CPR) explained the finer details for this scam.

Read Also: Dogecoin, Solana, Cardano Prices Crash in Double Digits! What Happened?

Smart Contract Scams: Rug Pull Strategy

CPR emphasized that rug pull is abusing misconfigurations in the smart contract. This means traders who are unaware of the indicators can be fooled by this strategy.

As previously mentioned, malicious actors will first launch their attack by offering scam services in the smart contract. These are often advertised on social media platforms to generate hype.

Developers will then add hidden triggers to the market. This might reflect as 99 percent buy fees or unique mechanisms that prevent traders from reselling the coin.

Be warned that scams also do not impose timelocks in their market. The researcher explained that timelocks are used to delay administrative actions and serve as an indicator that the project is legitimate.

Once the scam coin is fully launched, malicious actors will exploit a few more vulnerabilities in the crypto market. The research team discovered that some use hidden functions to create more coins and control trader accounts that sell coins. Others have their transfer function fully disabled.

In another situation, the malicious actor exploited coin minting to generate millions of virtual coins fraudulently before withdrawing them. This created an error in the system where scammers could exploit the emergency withdrawal function.

Lastly, some scammers burn up tokens to manipulate existing market prices. This strategy lets them influence a coin's value to bearish or bullish trades, depending on where they can gain profits.

Researchers warned it might be "hard to ignore the appeal of crypto." However, entering this digital trade without the proper knowledge and awareness can lead to investments losses. Researchers emphasize that "scammers will always find new ways to steal your money using cryptocurrency." So traders are recommended to only invest money they can afford to lose in the market.

Related Article: Cryptocurrency Price Boom 2022: Crypto Billionaire Names 2 Ethereum Killers to Invest In

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