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Squid Game Rug Pull Scam: How Do We Choose A Reliable Project?
09 November 15:35
- The price of Squid rose more than 10,000 times in the week following its release, before flash crashing to zero on November 1st.
- The Squid coin scam is typically known as a “rug pull”.
- There were many signs indicating the risks of investing in Squid before the collapse occurred.
- The strong FOMO in investors also contributed to the scam.
- It is significant for all investors to do their research when choosing a cryptocurrency.
In the third quarter of this year, Netflix's original dystopian series Squid Game went live and then quickly rose to popularity, taking the top spot for hits in over 190 countries. The Squid Game has globally attracted more than 100 million viewers, making it the most watched series in the history of Netflix. As this show exploded in popularity, elements from it such as tracksuits and dalgona candy also became trending on the Internet. As a television production with a truly global reach, its popularity has also spread to the crypto space, with a number of tokens inspired by it appearing immediately.
Image: Netflix
Earlier this month, Squid, a Play-to-Earn token based on Binance Smart Chain (BSC), saw a sudden surge in its price, reaching a peak of $2,860. And then it was followed by a flash crash, collapsing to below $0.001 within just five minutes. At the same time, the project's official website suddenly disappeared. And its Twitter was pulled due to "suspicious activity". The creator of Squid Game coin made an explanation for its abandoning the project in the Telegram group that the project had been hacked and that the team was depressed from scammers that had overwhelmed them with stress. Obviously, it was just an excuse to pocket investors’ funds and escape.
An official BSC investigation into this incident has been launched. However, due to the secretive nature of such DeFi scams, it remains questionable whether the perpetrators can be found.
The Story Of Squid Scam
The Squid coin scam is typically known as a “rug pull” in which developers attract a large number of investors and funds and then quickly sell off the large size of tokens it holds, extracting liquidity from the trading pool and then running away with the money. As Squid can only be traded on Pancakeswap, it is simpler for the project creator to extract liquidity. At least 40,000 investors still hold Squid tokens after the collapse occurred. According to the tech site Gizmodo, developers of the Squid project scammed nearly $3.38 million.
The Squid cryptocurrency, which started its presale on October 20th, was officially released on October 29th at an initial price of $0.01. After that, the Squid price surged two thousandfold to $2.22 within 24 hours, before it continued to rise and hit an all-time high of $2,860 which was followed by a flash crash. Its soaring in price has even received coverage from the BBC, Yahoo, Fortune, CNBC and many other mainstream media outlets.
Squid Game project marketed its token (as Squid) as a "Play-to-Earn” cryptocurrency, and the game they promised in the whitepaper to design mimics the plot of Netflix's show Squid Game in its entirety. Players need to pay a certain amount of Squid to participate in the game. In addition, the platform would design a variety of NFTs, such as costumes and props from the series’ episodes, for players to purchase. Of the Squid coins paid for participation in the game, 10% would be paid to developers and the remaining 90% would be added to the reward pool.
The project also set up a so-called "anti-dumping mechanism", which requires investors to lock in their Squid crypto coins for at least three years before they can sell them. Its “buy only, no sell” mechanism has instigated the irrational rise in the price. Squid can only be purchased on Pancakeswap. On November 1st, it crashed instantly as 70 million coins were dumped on the market.
In addition to the design of these mechanisms, which are clearly directly related to this scam, numerous other signs indicate the risk of investing in Squid. During the promotion, the project claimed that Squid coin was an exclusive partnership token for the series Squid Game, but it is not confirmed with Netflix that they had any official plans to do so. In addition, the project has “attracted” Musk, OpenSea, CoinMarketCap, CoinGecko and others to "stand up" for itself. For example, its official website had screenshots of Musk's tweets supporting Squid coin, but Musk has never actually posted a tweet involving Squid. And the project officially claimed that the token would be listed on CoinGecko, but CoinGecko CEO has publicly stated that Squid does not meet its listing criteria.
Image: The sketchy official website page before the project team ran away
What's more, the project's Telegram group does not allow anyone other than the creator to speak, and its Twitter prohibits others from commenting. These suspicions should actually have been brought to people's attention a long time ago. The project's security was also warned about by CoinMarketCap and Gizmodo, before the collapse of Squid, but unfortunately these warnings were apparently ignored by investors.
Don’t FOMO, Please.
This farce was commented on by many netizens as "in keeping with the spirit of Squid Game", but the irrationality shown by investors when faced with the scam is also worth reflecting on. Both the "removing zeros" of Shib some time ago and the earlier spike in Dogecoin have created a strong FOMO sentiment (Fear of Missing Out) among investors. Last August, an investor bought Shiba Inu coins at the cost of $8,000, and these coins are now worth billions of dollars. There are many examples of such a boom in the crypto world, but those who can profit from the skyrocket are ultimately in the minority, and more people will regret missing out on the surge. As a result, people were desperate to find the next early stage project enjoying a potential to rise a thousandfold.
It is in this severe FOMO that people ignored the many signs and warnings and stepped into the rug pull prepared by scammers long ago. Squid Game crypto scam is not the first rug pull in the crypto space, and it certainly won't be the last. It is significant for all investors to do their research when choosing a cryptocurrency. First, try to select a reliable project, or at least one whose member information is available. Check whether the experience of the project's creator is genuine and found on platforms such as Linkedin. Secondly, make sure whether the project has real and credible institutional investment or investors, or whether it has been endorsed by people in the relevant industry. Investors are also advised to make transactions on major well-reputed centralized platforms to avoid project risks.
Author: Ashley. H, Gate.io Researcher
*This article represents only the views of the researcher and does not constitute any investment suggestions.
*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all other cases, legal action will be taken due to copyright infringement.
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