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Rug pulls claim 65% of Q3 crypto hacks, hacken notes

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TL;DR

  • Hacken’s new report highlights the alarming prevalence of ‘rug pulls,’ contributing to 65% of all crypto scams in Q3 2023.
  • Rug pulls, characterized by sudden token value depletion, are deceptively simple to orchestrate, with scammers using token factories for mass fraud.
  • Surprisingly, out of 78 investigated rug pulls, only 12 had any semblance of an auditing process.

Hacken, a significant blockchain security auditor, recently unveiled startling insights into the pervasive world of cryptocurrency rug pulls. In its latest report released on October 25, the firm highlighted that these types of exit scams, known for their sudden liquidity withdrawals after token pumping, are less stealthy than presumed. Notably, they contributed to 65% of all crypto-related breaches in the third quarter of 2023.

Their apparent simplicity to execute sets rug pulls apart in the fraud arena. Hacken pinpointed the ease with which serial scammers deploy “token factories” to mass-produce fraudulent tokens, contributing significantly to the market’s inundation with these schemes.

However, despite the high incidence, Hacken emphasizes that rug pulls are arguably the most straightforward scams to sidestep. Vigilance begins with checking whether a project has undergone independent third-party auditing. Out of 78 rug pulls that Hacken scrutinized in the third quarter, a mere 12 claimed to have undergone any audit procedure.

Yet, the presence of an audit is not a foolproof shield against deception. The firm underscored the critical oversight many investors make: neglecting to delve into the audit’s quality. An audit can exist, but the risk remains high if its score is subpar. This nuance often slips past an average investor’s radar, overshadowed by the relief of seeing an audit in place.

Dyma Budorin, Hacken’s co-founder and CEO, shed light on the psychological drivers behind such investor behavior. The collective fear of missing out, especially in the wake of memecoins yielding windfall profits, blindsides individuals. They cast caution to the wind, lured by past success stories of astronomical returns from trivial initial investments.

The scammers, conversant with this investor psyche, exploit it to the hilt. They skillfully replicate elements from successful projects, fanning the flames of FOMO and luring investors into their nets. Moreover, the simplicity of the investment process, requiring scant more than a few clicks, facilitates impulsive decision-making, Budorin explained.

The insights from Hacken serve as a clarion call to the crypto investment community. The fight against rug pulls, seemingly daunting due to their prevalence, hinges on investor awareness and due diligence. Proactively examining a project’s audit, understanding its context, and resisting the FOMO lure can fortify one’s defense against these insidious crypto pitfalls.

Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decision.

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Mutuma Maxwell

Maxwell especially enjoys penning pieces about blockchain and cryptocurrency. He started his venture into blogging in 2020, later focusing on the world of cryptocurrencies. His life's work is to introduce the concept of decentralization to people worldwide.

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