scam

SEC accuses Utah firm of ‘fraudulent’ $18M crypto mining scheme

The United States Securities and Exchange Commission said Green United’s operation was a fraud, with the community quick to quell fears of the SEC classing crypto mining as a security.

Software and crypto mining equipment offered by the Utah-based Green United LLC was part of an $18 million “fraudulent scheme” that never mined the crypto it said it would, according to allegations by the United States Securities and Exchange Commission (SEC).

The regulator filed a complaint in a Utah District Court on March 3 against Green United, its founder, Wright Thurston, and contracted promoter Kristoffer Krohn.

The complaint alleges the company and the two representatives fraudulently offered securities between April 2018 and December 2022 by selling investments in $3,000 “Green Boxes” and “Green nodes” purported to mine the GREEN token on the “Green Blockchain.”

Investors were allegedly told the firm was to develop the Green Blockchain to create a “public global decentralized power grid,” and the GREEN token would increase in value based on its efforts with returns of up to 50% a month.

However, the SEC claimed the hardware sold didn’t mine GREEN as it was an Ethereum-based ERC-20 token that could not be mined and the Green Blockchain didn’t exist.

It added the GREEN token was created “several months” after the first hardware sales to investors and was periodically distributed to “create the appearance of a successful mining operation.”

Instead the real scheme, according to the SEC, was using the funds to buy S9 Antminers — Bitcoin (BTC) mining rigs — which were passed off as the Green “boxes” and “nodes” to investors. The firm mined Bitcoin, not GREEN tokens, which the investors “did not receive.”

Is the SEC going after mining?

Meanwhile, the crypto community on Twitter has hosed down one interpretation of the SEC complaint, which suggests that the SEC is going after crypto miners arguing that selling miners or offering hosting for them is a securities investment contract.

The take came in a March 6 tweet from pseudonymous lawyer “MetaLawMan.”

However, crypto advocate and investment adviser Timothy Peterson argued the interpretation was a “bad take,” adding the case doesn’t “target mining in general.”

“The SEC is not saying ‘all sales of mining equipment is now a security,’” Peterson clarified.

Related: Lawmakers should check the SEC’s wartime consigliere with legislation

Another crypto commentator, Dennis Porter, CEO of the Bitcoin advocacy group the Satoshi Action Fund, tweeted that “the SEC is not coming after mining” and it “did not classify hosting as a security” and said Green United’s operation was “a scam disguised as mining.”

The SEC has asked for a court order to require Thurston, Krohn and Green United to cease operations, seeks civil penalties for securities law violations and repay the $18 million in allegedly ill-gotten gains.

Nifty News: Price drops on ‘Cryptohouse’ with NFT decor, mint your personality as an NFT and more

The owner of the crypto-themed home has dropped its price by over 20% in a few months as they struggle to sell the house.

Waning interest in a North Hollywood crypto-themed home

A crypto-friendly house in North Hollywood, Los Angeles, is seemingly struggling to sell, as the property has seen its price reduce three times in a little over four months.

The so-called “Cryptohouse,” as stated on the glowing neon sign in its kitchen, was listed for sale at $1.2 million in October 2022. As of Jan. 5, its asking price is now $949,000.

The impressive custom neon sign never lets you forget just where you are. Image: Zillow

The four-bed, three-bath home sees the listing agents boasting in the property description of its spacious and flowing floor plan ideal for “savvy investors.”

For unknown reasons, the description doesn’t mention its tasteful wallpaper choices, which include multiple nonfungible tokens (NFTs) from the classic Bored Ape Yacht Club and CryptoPunk collections prominent in the living and dining areas.

The future owner can look forward to explaining the unique decor choices to dinner guests. Image: Zillow

The house also features themed wallpapers in each of the four rooms, one each for Bitcoin (BTC), Ether (ETH) and Dogecoin (DOGE), with one room smattered with a selection of crypto-positive tweets.

Guests will surely be saying “much wow” if they sleep in the DOGE room. Image: Zillow

Those wanting to try before they buy can even rent the house through Airbnb. Although, there’s no rush because it currently has no future bookings.

Make your personality an NFT and mint your heart on the blockchain

A project is offering up NFTs as a way to visually portray an individual’s personality and own the result on the blockchain.

Rubens DB, a Tel Aviv-based artist, launched the “Psynesthesia” NFT collection with 1,024 possible NFTs generated by the results of a personality test.

The Polygon-based NFTs are generated according to the traits identified by the test and an algorithm coded by DB. The process is explained in a release shared with Cointelegraph:

“For example, the more the agreeableness is high, the more the colors are warm; the more the extroversion is high, the more the connections are developed.”

The resulting art can be collected as an NFT. The original owner is also granted a photoshoot at Rubens DB’s studio in Tel Aviv, where their artwork is projected onto them in a portrait.

An example of the NFTs generated from the personality tests. Image: Psynesthesia

10% of the sales are donated to the Multidisciplinary Association for Psychedelic Studies, a United States-based nonprofit aiming to increase understanding of psychedelic substances.

UK NFT investment firm gets phished

NFT Investments, a United Kingdom-based investment firm that invests in NFT-related companies, said it was the target of a phishing attack resulting in the loss of $250,000 worth of assets.

The firm announced on the London Stock Exchange’s news wire on Jan .12 that it is “managing a cybersecurity incident” resulting from the attack on Jan. 9.

Apparently, the hacked amount represents “less than 1%” of the firms current net asset value.

It did not disclose what assets were stolen or how attackers compromised the security surrounding the storage of the investments.

Cointelegraph contacted NFT Investments for more information regarding the incident, a spokesperson said the company had no further comment.

What bear market? Shiba Inu NFT collab sells out in seconds

An NFT collaboration between Shiba Inu’s (SHIB) NFT project “SHIBOSHIS” and luxury handbag company Bugatti Group sold out in 110 seconds, according to a Jan. 14 tweet from Bugatti Group.

Bugatti Group — not to be confused with the luxury sports car manufacturer Bugatti Automobiles — created a new batch of NFTs with the dog-themed project and offered those who minted one a piece of custom luggage emblazoned with a SHIBOSHIS NFT.

Related: NFTs have a brighter future on Instagram than on Twitter

The collaboration between the two also sees Bugatti Group creating a SHIBOSHIS-themed limited edition collection of backpacks, satchels, luggage and wallets.

Other nifty news

The crypto wallet of an NFT influencer has been drained after mistakenly downloading malware hiding in a program advertised on a Google Ad.

YouTuber Logan Paul revealed a $1.5 million recovery plan for those who invested in his troubled NFT project CryptoZoo after an exposé from fellow YouTuber Coffeezilla.

Google Ads-delivered malware drains NFT influencer’s entire crypto wallet

A sponsored advertising link on Google hid malware that siphoned thousands of dollars worth of crypto and NFTs from an influencer’s wallet.

An NFT influencer claims to have lost “a life-changing amount” of their net worth in nonfungible tokens (NFTs) and crypto after accidentally downloading malicious software found via a Google Ad search result.

The pseudo-anonymous influencer known on Twitter as “NFT God” posted a series of tweets on Jan. 14 describing how his “entire digital livelihood” came under attack including a compromise of his crypto wallet and multiple online accounts.

NFT God, known also as “Alex,” said he used Google’s search engine to download OBS, an open-source video streaming software. But instead of clicking on the official website, he clicked the sponsored advertisement for what he thought was the same thing. 

It wasn’t until hours later — after a series of phishing tweets posted by attackers on two Twitter accounts that Alex operates — that he realized malware was downloaded from the sponsored advertisement alongside the software he wanted.

Following a message from an acquaintance, Alex noticed his crypto wallet was also compromised. The next day, attackers breached his Substack account and sent phishing emails to his 16,000 subscribers.

Blockchain data shows that at least 19 Ether (ETH) worth nearly $27,000 at the time, a Mutant Ape Yacht Club (MAYC) NFT with a current floor price of 16 ETH ($25,000), and multiple other NFTs were siphoned from Alex’s wallet.

The attacker moved most of the ETH through multiple wallets before sending it to the decentralized exchange (DEX) FixedFloat, where it was swapped for unknown cryptocurrencies.

Alex believes the “critical mistake” that allowed the wallet hack was setting up his hardware wallet as a hot wallet by entering its seed phrase “in a way that no longer kept it cold,” or offline, which allowed the hackers to gain control of his crypto and NFTs.

Related: Navigating the World of Crypto: Tips for Avoiding Scams

Unfortunately, NFT God’s experience isn’t the first time the crypto community has dealt with crypto-stealing malware in Google Ads.

A Jan. 12 report from cybersecurity firm Cyble warned of an information-stealing malware called “Rhadamanthys Stealer” spreading through Google Ads on “highly convincing phishing webpage[s].”

In October, Binance CEO Changpeng “CZ” Zhao warned that Google search results were promoting crypto phishing and scamming websites.

Cointelegraph contacted Google for comment but did not receive a response. In its help center, however, Google said it “actively works with trusted advertisers and partners to help prevent malware in ads.”

It also describes its use of “proprietary technology and malware detection tools” to regularly scan Google Ads.

Cointelegraph was unable to replicate the results of Alex’s search nor verify if the malicious website was still active.

CoinMarketCap-led token airdrops ‘infected by fraud,’ crypto project claims

A crypto project claims a promotional token airdrop campaign led by CoinMarketCap was riddled with “fraud” that left its token price crumbling.

Two crypto projects have cried foul play over promotional airdrops conducted by CoinMarketCap (CMC) on their behalf, which they allege was “gamed” for the benefit of a small group of exploiters.

These promotional airdrops — designed to be distributed to thousands of wallets to raise awareness of a crypto project — ended with the tokens funneling to just a handful of wallets, suggesting potential manipulation of the system.

SATT token drop

Blockchain advertising solution SaTT alleged to Cointelegraph that a promotional airdrop it paid CMC to conduct in Dec. 2022 ended with 84% of the airdropped tokens funneling to just 21 wallets.

The promotion was meant to see 25,000 winning wallets receive 4,000 SATT each, worth $6.30 at the time per CoinGecko data.

However, SaTT claimed that shortly after the airdrop was distributed, 20,953 wallets “automatically transferred the tokens to 21 wallet addresses” which then sold off their token holdings days later around Dec. 10, netting around $142,000 for those 21 wallet owners.

The sell-off plunged the price of SATT by 70% between the end of the airdrop on Dec. 1 to when the wallets sold their tokens on Dec. 10.

SaTT claims wallet 0x929… (pictured) has over 4,500 transactions of its token, the largest it found out of the 21. Blockchain data shows the wallet sold over 4.3 million tokens through PancakeSwap. BscScan

TokenBot token drop

A similar experience was shared by TokenBot co-founder Shaun Newsum, who told Cointelegraph that it did a similar CMC-led airdrop of its TKB token on Dec. 9.

Newsum said CMC provided its 30,000 airdrop winners but he chose to “stagger” the airdrop “just in case something happens.”

TokenBot sent out its tokens to a batch of 4,000 winners to start, but around 3,300 ended up sending the funds to one wallet, said Newsum.

Blockchain data shows thousands of TKB transactions flowing to wallet 0x5AF… before initiating a cross-chain swap and then selling its holdings. BscScan.

Newsum said around $20,000 was lost by TokenBot in the incident and the project had to deploy more liquidity from its treasury.

“Obviously some person figured out how to game CMC,” he added. “If we were to have bulk sent, the whole airdrop would’ve been a complete disaster.”

Newsum however said he has since received an apology from CMC and was told that it was investigating the airdrop and would return with an updated winners list for the project.

Cast your vote now!

In its investigation, SaTT claims to have found another 18 tokens or nonfungible tokens (NFTs) airdrops conducted by CMC since Jul. 2022 that were also allegedly “infected by fraud” to the tune of $6.6 million.

This included airdrops for projects including TopGoal, OwlDAO and AgeofGods.

SaTT theorized two possibilities of how the “fraud” occurred:

“Either a group of hackers injected tons of fake accounts [into the airdrop on CMC’s website] […] or it was actually an inside job.”

CoinMarketCap responds

Speaking to Cointelegraph, a CMC spokesperson addressed some of these claims, arguing that at least four of the projects identified by SaTT have yet to distribute rewards, meaning it would be “impossible” for them to have faced “malicious” activity.

It also noted that while three projects, including SaTT, AgeOfGods and TokenBot have spoken to the CMC team about their concerns, it has not received any communications from other projects about the alleged issues.

The spokesperson however acknowledged that “bots are an issue that touches nearly every industry.”

“The industry has been facing this issue among airdrop programs for some time and the reality is that not a single industry has been able to solve the bot issue entirely.”

“We are continuously working to improve our systems and services to limit this issue and will work closely with these projects to find solutions and help resolve any current issues,” the spokesperson added.

Related: Crypto’s recovery requires more aggressive solutions to fraud

CMC added that any claims of bot participation in its airdrops are taken “very seriously” and itis “working on resolving each case individually.”

It also shared several features it has employed to deter bot participation, such as a CAPTCHA challenge and email verification requirements for participants. It’s also developing a two-factor authentication integration.

Cointelegraph contacted TopGoal and OwlDAO for comment but did not receive a response at the time of publicati. AgeofGods could not be reached for comment.

‘Infected by fraud’ — Projects claim CoinMarketCap airdrops were gamed

A crypto project claims a promotional token airdrop campaign led by CoinMarketCap was riddled with “fraud” that left its token price crumbling.

Two crypto projects have cried foul play over promotional airdrops conducted by CoinMarketCap (CMC) on their behalf, which they allege was “gamed” for the benefit of a small group of exploiters.

These promotional airdrops — designed to be distributed to thousands of wallets to raise awareness of a crypto project — ended with the tokens making their way to just a handful of wallets, suggesting potential manipulation of the system.

SATT token drop

Blockchain advertising solution SaTT told Cointelegraph that a promotional airdrop it paid CMC to conduct in December 2022 ended with 84% of the airdropped tokens going to just 21 wallets.

The promotion was supposed to see 25,000 winning wallets receive 4,000 SATT each, worth $6.30 at the time according to CoinGecko data.

However, SaTT claimed that shortly after the airdrop distribution, 20,953 wallets “automatically transferred the tokens to 21 wallet addresses,” which sold off their token holdings days later, netting around $142,000 for those 21 wallet owners.

The sell-off plunged the price of SATT 70% between the end of the airdrop on Dec. 1, to when the wallets sold their tokens on Dec. 10.

SaTT claims wallet 0x929… (pictured) has over 4,500 transactions of its token, the largest it found out of the 21. Blockchain data shows the wallet sold over 4.3 million tokens through PancakeSwap. Source: BscScan

TokenBot token drop

TokenBot co-founder Shaun Newsum told Cointelegraph of a similar experience when the company did a  CMC-led airdrop of its TKB token on Dec. 9.

Newsum said CMC provided its 30,000 airdrop winners but he chose to “stagger” the airdrop “just in case something happens.”

TokenBot sent out its tokens to a batch of 4,000 winners to start, but around 3,300 ended up sending the funds to one wallet, said Newsum.

Blockchain data shows thousands of TKB transactions flowing to wallet 0x5AF… before initiating a cross-chain swap and then selling its holdings. Source: BscScan.

Newsum said around $20,000 was lost by TokenBot in the incident, with the project having to deploy more liquidity from its treasury.

“Obviously some person figured out how to game CMC,” he added. “If we were to have bulk sent, the whole airdrop would’ve been a complete disaster.”

Newsum said he has since received an apology from CMC who said it was investigating the airdrop and would return with an updated winners list for the project.

Cast your vote now!

In its investigation, SaTT claims to have found another 18 tokens or nonfungible token (NFT) airdrops conducted by CMC since July 2022 that were also allegedly “infected by fraud” to the tune of $6.6 million.

This included airdrops for projects including TopGoal, OwlDAO and AgeOfGods.

SaTT theorized two possibilities of how the “fraud” occurred:

“Either a group of hackers injected tons of fake accounts [into the airdrop on CMC’s website] […] or it was actually an inside job.”

CoinMarketCap responds

Speaking to Cointelegraph, a CMC spokesperson addressed some of these claims, arguing that at least four of the projects identified by SaTT have yet to distribute rewards, meaning it would be “impossible” for them to have faced “malicious” activity.

The spokesperson also noted that while three projects, including SaTT, AgeOfGods and TokenBot have spoken to the CMC team about their concerns, it has not received any communications from other projects about the alleged issues.

However, the spokesperson acknowledged that “bots are an issue that touches nearly every industry.”

“The industry has been facing this issue among airdrop programs for some time and the reality is that not a single industry has been able to solve the bot issue entirely.”

“We are continuously working to improve our systems and services to limit this issue and will work closely with these projects to find solutions and help resolve any current issues,” the spokesperson added.

Related: Crypto’s recovery requires more aggressive solutions to fraud

They added that any claims of bot participation in its airdrops are taken “very seriously” and it is “working on resolving each case individually.”

They also shared several features employed by CMC to deter bot participation, such as a CAPTCHA challenge and email verification requirements for participants. The company is also developing a two-factor authentication integration.

Cointelegraph contacted TopGoal and OwlDAO for comment but did not receive a response by the time of publication. AgeOfGods could not be reached for comment.

Nifty News: Fake Pokémon NFT game spreads malware, ‘Jai Ho’ singer to launch metaverse and more

Software used to access computers remotely has been inserted in a phishing website fronting as an NFT card game for the popular Pokémon franchise.

Hackers hide malware in fake NFT game

A phishing website purporting to offer a Pokémon-branded nonfungible token (NFT) card game has been spreading malware to unsuspecting gamers, a cybersecurity firm has warned.

The website, which at the time of writing was still online, also claims to offer an NFT marketplace, with a link to buy tokens, and even an area to stake NFTs — all based on the popular Japanese media franchise.

However, an arm of the South Korean cybersecurity firm AhnLab warned the public about the website on Jan. 6, noting that instead of downloading agame, users were actually downloading a remote access tool that allows hackers to take control of their device.

A screenshot of the phishing website. The “Play on PC” link at the bottom of the image downloads the malware.

The tool, known as NetSupport Manager, would allow the attackers to remotely control the computer’s mouse and keyboard, access the system’s file management and history and even execute commands allowing them to install additional malware, the firm warned.

The public has been advised to only purchase or download applications from official websites and not open attachments in suspicious emails.

The composer behind ‘Jai Ho’ to spin up metaverse

Allah Rakha Rahman, the Indian composer and singer known for the Grammy Award-winning song “Jai Ho,” is launching his own metaverse platform for artists and their music.

Rahman tweeted on Jan. 6 that his “Katraar” metaverse “is one step closer to launching.” He attached a video of him explaining the upcoming platform, which will use “decentralized technology,” according to its website.

In the video, Rahman said his vision for the platform was to “bring in new talents, technologies, and […] direct revenue for artists,” with one revenue stream seemingly the integration of NFTs.

“Right now we are working with the HBAR Foundation to do many cool things, one is bringing a lot of NFTs.”

The HBAR Foundation is a not-for-profit independent organization of the distributed ledger firm Hedera Hashgraph, the creator of the ledger and cryptocurrency Hedera (HBAR).

Rahman added there’s also “an undisclosed project based on virtual beings” but did not provide further details.

2023’s first week saw NFT sales jump 26%

Post-Christmas blues appears to have worn off, at least for the NFT market, with sales volume jumping nearly 26% in the first week of 2023, compared to the prior week.

According to data from market metrics aggregator Cryptoslam, in the seven days that ended Jan. 7, NFT sales volume was over $211.4 million, with around 1.2 million NFTs transacted between over 400,000 buyers.

The number of buyers increased by 17% on the week, but transactions only grew by just over 2.5%.

Ethereum-based NFTs remained popular, with sales on the blockchain up nearly 26%.

The top three collections for the week were similarly Ethereum-native, Yuga Labs’ Bored Ape Yacht Club was in first place with nearly $19 million traded, up nearly 50% in terms of volume.

The Mutant Ape Yacht Club collection was second, with an increase of 80% to hit $14 million in sales volume. Azuki was third, with sales surging 132% to $12.7 million.

Every frame of feature-length film minted as an NFT

The producers of the 2022 thriller film The Rideshare Killer have released nearly 120,000 unique NFTs in what they’ve dubbed the “first ‘every frame minted’ (EFM) film.”

Exactly 119,170 NFTs each representing one frame of the 83-minute long film shot in 24 frames per second were minted on the Polygon blockchain, according to a Jan. 5 press release.

The film’s producer, Tony Greenberg, said he believed tha NFTs “will change the independent film landscape” as they offer a “potentially appreciating collectible” to fans and a “sustainable revenue source for artists.”

The film may have to rely on its NFT sales to break even if its reviews are anything to go by.

It currently has a rating of 4/10 across eight reviews on the online film database and reviews website IMDb, with one critic saying the movie “should never have been made.”

Other Nifty News

YouTuber and sports beverage merchant Logan Paul has made a U-turn on his threat to sue Stephen “Coffeezilla” Findeisen for defamation over Findeisen’s allegations that Paul’s NFT project CryptoZoo was a scam.

NFT marketplace SuperRare has gutted 30% of its staff, with CEO John Crain saying it “over-hired” during the crypto bull market. Crain added the company was “facing headwinds” due to the ongoing crypto winter.

Robocallers have upped their scam game and they’re after your crypto

Sophisticated malicious outfits are keeping up with current trends, turning their sights on crypto users following the bankruptcy of FTX.

Professional scam organizations are targeting cryptocurrency users following the collapse of FTX, initiating millions of automated calls and text messages in an attempt to swindle information and funds.

Clayton LiaBraaten, senior executive adviser at Truecaller — an app that helps identify scam callers and messages — spoke to Cointelegraph,  scammers often closely follow crypto news to better prey on their victims:

“Fraudsters love volatility and current events. Anytime they can try to surf the contours of something very disruptive in the marketplace they have a great deal of success.”

LiaBraaten said that Truecaller also saw an increase in scam communications relating to Bitcoin (BTC) and other cryptocurrencies when the market started to become volatile earlier in 2022.

He added “agents” ultimately looking to steal funds launch millions of automated “robocalls“ and texts trying to latch onto people’s “fear, curiosity, and sometimes generosity.”

Phone numbers can be obtained in a variety of ways, including through data breaches that have leaked millions of numbers, or vitools that scrape social media platforms for information.

An imposter scam is most commonly seen by Truecaller, where a malicious actor will pretend to represent a support desk or similar entity from a major crypto exchange or business. Scammers will also publish their phone numbers on fake imitation websites, attempting to legitimize themselves.

Younger adults are more often targeted by fraudsters as “there’s so much information available about them because they put so much out there on social media,” according to LiaBraaten.

“They use the same handle for their Bitcoin forum as they do their TikTok and across all these social media platforms […] It’s very easy to build a data graph on these individuals and then begin targeting them. There’s just so much material to social engineer against with the younger generations.”

The abundance of information people put online allows scammers to send messages or calls that are in context to their intended targets, maki the malicious communications more convincing.

“They’re great psychologists and social engineers so they will try as hard as they can to bring something contextually relevant,” LiaBraaten said.

The initial call or text isn’t necessarily going to result in financial fraud LiaBraaten says, with agents first attempting to acquire or confirm information about their target in a bid to create trust.

“They’re building more and more details about the persona and when they gather enough information, then yes, they’re going to try to access your crypto wallet.”

“There’s a lot of folks who don’t really understand cryptocurrency,” LiaBraaten said. “They go after vulnerable people, so it’s unlikely that very savvy cryptocurrency aficionados are going to fall prey to this, because they’re pretty sharp about what they’re doing and very guarded.”

Related: Sam Bankman-Fried deepfake attempts to scam investors impacted by FTX

Regardless of a person’s ability to detect a scam, he said anyone who calls or messages asking for personal information or passwords should not be engaged with and only official channels should be used.

“One of the worst things that you can do is stay on the phone with these guys because it is their mission to relieve you of your cryptocurrency. It just takes a vulnerable moment, one minute of second-guessing yourself, and then they’re off to the races.”

In February, Binance CEO Changpeng “CZ” Zhao raised the alarm over a “massive” SMS phishing scam targeting Binance customers.

The scam involved sending users a text message with a link to cancel withdrawals, leading users to a fake website designed to harvest their login credentials.

350 new ‘scam tokens’ were created every day this year: Solidus Labs

Nearly 118,000 scam tokens were deployed from the start of January through the end of November, according to blockchain risk monitoring firm Solidus.

More than 350 fraudulent cryptocurrency tokens were created per day this year, defrauding millions of investors, according to blockchain risk monitoring firm Solidus Labs.

From the start of the year to Dec. 1, 117,629 “scam tokens” were deployed, according to Solidus’ 2022 “Rug Pull Report.” That’s a 41% increase from the nearly 83,400 scam tokens that Solidus detected in 2021.

The report claims that BNB Chain harbors the greatest number of scam tokens, with 12% of all BEP-20 tokens being fraudulent.

The Ethereum network was second, with a purported 8% of ERC-20 tokens alleged to be scams.

Solidus claims that 2022 is the biggest year on record for fraudulent crypto-tokens. Image: Solidus Labs

A rug pull is a type of crypto exit scam where an individual or team creates a token and pumps up its price before extracting all the value from the project, abandoning it as the token price plummets to zero.

Almost 2 million investors have lost money to these scams since September 2020, a greater numberthan the estimated 1.8 million combined creditors affected by the bankruptcies of crypto exchanges and lending platforms FTX, Celsius, and Voyager.

FTX, Celsius, BlockFi and Voyager bankruptcies are estimated to affect over 2.3 million users combined. Image: Solidus Labs

The most popular type of scam token was a “honeypot,” which is a token smart contract that doesn’t allow buyers to resell.

Solidus said the most prolific “honeypot” successfully executed in 2022 was the $3.3 million Squid Game (SQUID) token scam, which grew 45,000% in a few days as investors bought the hype but were unable to sell, ending with the anonymous founders apparently running off with investor funds.

Centralized exchanges (CEXs) are also affected by rug pulls as many behind these malicious tokens use them to fund their fraudulent project and cash out the ill-gotten gains.

Solidus claims around $11 billion worth of Ether (ETH) pilfered from scam tokens flowed through 153 CEXs since September 2020, with the majority of the exchanges being overseen by United States regulators.

Related: 5 key takeaways from Huobi 2022 crypto industry report

Nearly $4 billion dollars flowed to U.S. CEXs in the analyzed time frame which was nearly double that of the second-most exposed CEX jurisdiction: The Bahamas.

Charges laid over alleged ‘crypto mining’ Ponzis that netted $8.4M

Various creators and promotors of two allegedly fraudulent crypto companies are facing a litany of charges that could land them 20 years in jail.

United States prosecutors have laid charges in two separate cases against nine people who founded or promoted a pair of cryptocurrency companies alleged to be Ponzi schemes that netted $8.4 million from investors.

On Dec. 14 the U.S. Attorney’s Office for the Southern District of New York unsealed the indictment, alleging the purported crypto mining and trading companies IcomTech and Forcount promised investors “guaranteed daily returns” that could double their investment in six months.

In reality, prosecutors say both firms were using the money from later investors to pay earlier investors, while other funds were spent on promoting the companies and buying luxury items and real estate.

“Lavish expos” were held in the U.S. and abroad, along with presentations in small communities, that lured investors in with promises of financial freedom and wealth.

Promotors would allegedly show up at events in expensive cars, wearing luxury clothing and would boast about the money they were making from investing in the company they were promoting. Investors were given access to a “portal” to monitor their returns

IcomTech and Forcount started to fall apart when users were unable to withdraw their purported returns.

Charges brought against Forcount’s creators and promotors by the Securities and Exchange Commission (SEC) allege the outfit targeted primarily Spanish speakers and gathered over $8.4 million from “hundreds” of investors selling “memberships” offering a cut of its crypto trading and mining activities.

In an attempt to spin up liquidity both companies created tokens so they could try repay investors with IcomTech and Forcount launching “Icoms” and “Mindexcoin” respectively.

Seemingly the token sales failed as by 2021 both had stopped making payments to investors.

“With these two indictments, this Office is sending a message to all cryptocurrency scammers: We are coming for you,” said U.S. Attorney Damian Williams. “Stealing is stealing, even when dressed up in the jargon of cryptocurrency.”

Related: ​​Cryptocurrency has become a playground for fraudsters

David Carmona of Queens, New York was named in the indictment as the founder of IcomTech, and was charged with conspiracy to commit wire fraud that carries a maximum penalty of 20 years prison.

Forcount’s founder was named as Francisley da Silva, from Curitiba, Brazil and faces charges of wire fraud, wire fraud conspiracy and money laundering conspiracy which carries a maximum of 60 years in prison if convicted of all charges.

The promotors for the firms face various charges relating to wire fraud, wire fraud and money laundering conspiracy and making false statements.

Sam Bankman-Fried deepfake attempts to scam investors impacted by FTX

A faked video the FTX founder created by scammers has circulated on Twitter with users poking fun at its poor production quality.

A faked video of Sam Bankman-Fried, the former CEO of cryptocurrency exchange FTX, has circulated on Twitter, attempting to scam investors affected by the exchange’s bankruptcy.

Created using programs to emulate Bankman-Fried’s likeness and voice, the poorly made “deepfake” video attempts to direct users to a malicious site under the promise of a “giveaway” that will “double your cryptocurrency.”

The video uses appears to be old interview footage of Bankman-Fried and used a voice emulator to create the illusion of him saying “as you know our F-DEX [sic] exchange is going bankrupt, but I hasten to inform all users that you should not panic.”

The fake Bankman-Fried then directs users to a website saying FTX has “prepared a giveaway for you in which you can double your cryptocurrency” in an apparent “double-your-crypto” scam, where users send crypto under the promise they’ll receive double back.

A now-suspended Twitter account with the handle S4GE_ETH is understood to have been compromised, leading to scammers posting a link to the scam website — which now appears to have been taken offline.

The crypto community has pointed to the fact that scammers were able to pay a small fee in order to get Twitter’s “blue tick” verification in order to appear authentic.

Meanwhile, the video received widespread mockery for its poor production quality, with one Twitter user ridiculing how the scam production pronounced “FTX” in the video, saying they’re “definitely using […] ‘Effed-X’ from now on.”

At the same time, it gave many the opportunity to criticize the FTX founder, one user said “fake [Bankman-Fried] at least admits FTX is bankrupt,” and YouTuber Stephen Findeisen shared the video saying he “can’t tell who lies more” between the real and fake Bankman-Fried.

Related: Crypto scammers are using black market identities to avoid detection: CertiK

Authorities in Singapore on Nov. 19 warned affected FTX users and investors to be vigilant as websites offering services promising to assist in recovering crypto stuck on the exchange are scams that mostly steal information such as account logins.

The Singapore Police Force warned of such a website which prompted FTX users to log in with their account credentials that claimed to be hosted by the United States Department of Justice.

Others have attempted to profit from the attention FTX and its former CEO are receiving. On Nov. 14, shortly after Bankman-Fried tweeted “What” without further explanation, some noticed the launch of a so-called memecoin called WHAT.

Deepfake videos have long been used by cryptocurrency scammers to try to con unwitting investors. In May, faked videos of Elon Musk promoting a crypto platform surfaced on Twitter using footage from a TED Talk the month prior.

The video caught Musk’s attention at the time, who responded: “Yikes. Def not me.”