The crypto industry has often found itself synonymous with internet crime. Although the truth is far from the claim, there is some weight to the fact that the crypto space is littered with scams and fraudsters.
According to Solidus’ recent Rug Pull Report for 2022, there were 117,629 scam tokens from the beginning of the year till Dec 1st. The data reported a 41% increase from the near 83,000 in 2021. According to the report, there were more than 350 scam tokens every day in 2022. Furthermore, the current number is astronomically higher than the 1548 scam tokens in 2020.
According to the survey, BNB Chain is home to the most fraudulent tokens. Moreover, 12% of all BEP-20 tokens are fake. The Ethereum network came in second, with a supposed 8% of ERC-20 crypto coins being scams.
The report also highlights that 15 new scam tokens are discovered every hour.
Rug pulls impact more people than any crypto collapse
The report noted that almost 2 million people have lost funds to rug pulls. This is equal to the number of investors who have suffered unsecured losses in a handful of the biggest crypto market crashes.
Additionally, the report says that “Honeypots” are the most common type of scam tokens. A “Honeypot” is a smart contract that forbids purchasers from reselling. The $3.3 million Squid Game (SQUID) token fraud, which soared 45,000% in a few days, was the most extensive “honeypot” carried out in 2022, according to Solidus. Investors bought the hype but were unable to sell, and the developers soon took off with client funds.
Rug pulls also harm centralized exchanges (CEXs). People behind these nefarious tokens utilize CEXs to finance their dubious projects and pay out ill-gotten earnings.
Since September 2020, 153 CEXs have allegedly handled $11 billion in stolen Ether through fraudulent tokens, with the bulk of these exchanges being governed by American authorities.