With the increase in popularity in cryptocurrencies, many crypto money projects are launched every day. However, it is up to the investors to determine which of these projects are reliable and which are not.
So much so that we have encountered many fraud cases in the crypto money market to this day. Today, a new one has been added to these cases.
Blockchain security firm PeckShield, in a new statement today, reported that the developers of this altcoin have closed all the social media accounts of the project and disappeared. Here are the details…
Another Rugpull Case Occurred in an Altcoin
Blockchain security firm PeckShield reported a new rugpull case with a tweet it shared during the day. In the Twitter post by PeckShield, it was stated that all social media accounts and groups of the project were deleted.
With these statements, PeckShiled warned investors against this altcoin called EarnHub.
What is Rugpull?
Rugpull, which we hear a lot in the cryptocurrency industry, is known when a development team suddenly abandons a project and sells or eliminates all its liquidity.
Rug Pull transactions are most commonly associated with Decentralized Finance (DeFi) projects that provide liquidity to Decentralized Exchanges (DEXs). DeFi tokens of new projects are not usually listed on Centralized Exchanges (CEXs), meaning the DEX is the only source of liquidity. Typically, a DeFi project will generate its tokens and provide some liquidity to a DEX.
This can be put directly into a liquidity pool (paired with another token such as ETH or BNB) or sold in an Initial DEX Offering (IDO). In an IDO, investors will buy the money and the proceeds will usually be locked for a certain period of time to guarantee a level of liquidity.
When deception levels are high and the project has reached sufficient liquidity, scammers have two options. They can sell tokens at a high price and remove all liquidity, or even use backdoors in smart contracts to steal investors’ funds.
Without sufficient liquidity, investors have difficulty selling their tokens or are forced to sell at a low price. This is because of the Automatic Market Maker (AMM) pricing mechanism that sets prices through the ratio of two coins in a liquidity pool.
Rug Pull transactions are quite common in DeFi as tokens can be easily created and then listed on DEXs with very little KYC or AML.