SafeMoon, a cryptocurrency project that gained traction through endorsements by celebrities and social media influencers, recently announced that its liquidity pool (LP) had been compromised. While the company has not revealed any details about the attack, it confirmed that it is taking steps to address the issue as soon as possible.
The incident is the latest in a series of attacks targeting cryptocurrency projects in recent months. Like many other crypto projects in 2021, SafeMoon was backed by numerous celebrities, including Nick Carter, Soulja Boy, Lil Yachty, and YouTubers Jake Paul and Ben Phillips. However, a lawsuit filed in February 2022 alleged that these endorsements were part of a larger scheme to defraud investors by misleading them to purchase SafeMoon tokens under the pretext of unrealistic profits.
Experts suggest that a recent software upgrade may be to blame for the vulnerability that allowed the attacker to compromise SafeMoon’s LP. According to PeckShield, a blockchain investigation firm, a public burn function introduced in the latest upgrade allowed users to burn tokens from other addresses, potentially creating a security flaw that could be exploited by hackers.
A community member known as “DeFi Mark” provided further details about the attack, explaining that the vulnerability was used to remove SafeMoon tokens, causing an artificial spike in the token’s price. The attacker was then able to sell off the tokens at an inflated price, taking advantage of the situation for personal gain.
The incident has raised questions about the security and legitimacy of SafeMoon, as well as the role of celebrity endorsements in cryptocurrency projects. While the company has not provided any further details about the attack or its response, it is clear that security is a top priority for SafeMoon and other cryptocurrency projects.
Cryptocurrency remains a relatively new and largely unregulated industry, with many investors drawn in by the promise of high returns and the endorsement of celebrities and influencers. However, as the SafeMoon incident and others like it have shown, there are risks involved in investing in this space, and investors should be cautious and do their own research before committing their money to any project.
Despite the challenges and risks, many experts believe that cryptocurrency and blockchain technology have the potential to revolutionize the financial industry and create new opportunities for investors and businesses alike. As the industry continues to mature and evolve, it is likely that we will see more incidents like the SafeMoon attack, but also more innovations and advancements that could transform the way we think about money and finance.
A federal grand jury in the District of Oregon has handed down indictments against the individuals who are believed to have been the masterminds behind the “global Ponzi” scam known as Forsage, which is said to have generated $340 million.
According to a statement released by the Department of Justice (DOJ) on February 22, the four Russian founders, Vladimir Okhotnikov, Olena Oblamska, Mikhail Sergeev, and Sergey Maslakov, have been formally accused of having key roles in the scheme that raised approximately $340 million from victim-investors. This information comes from the formal accusation.
U.S. Attorney Natalie Wight for the District of Oregon stated that “today’s indictment is the result of a rigorous investigation that spent months piecing together the systematic theft of hundreds of millions of dollars.” She also stated that “bringing charges against foreign actors who used new technology to commit fraud in an emerging financial market is a complicated endeavor only possible with the full and complete coordination of multiple law enforcement agencies.”
Forsage promoted itself as a low-risk, decentralized financial platform that was based on the Ethereum blockchain and offered customers the opportunity to create passive income over the long term. Blockchain analytics, on the other hand, allegedly shown that eighty percent of Forsage “investors” got back less money than they had initially contributed.
Analysis of the smart contracts, as reported by the Department of Justice (DOJ), indicated that monies that were obtained when new investors acquired “slots” in Forsage’s smart contracts were routed to older investors, which is consistent with the definition of a “Ponzi scheme.”
Forsage has an active Twitter account, on which they recently posted a thread saying that community members who take part in “The Ambassador Program” will be able to receive monthly incentives by accomplishing certain activities. The tweet was published on February 22.
The Securities and Exchange Commission filed charges of fraud and selling unregistered securities against the company’s four founders and seven promoters on August 1. At the time, acting chief of the SEC’s Crypto Assets and Cyber Unit Carolyn Welshhans said: “Fraudsters cannot circumvent the federal securities laws by focusing their schemes on smart contracts and blockchains.”
Back in 2020, the Philippines Securities and Exchange Commission had also raised concerns about Forsage, indicating that it may be a Ponzi scheme. However, one month later, the platform remained the second-most popular decentralized application (DApp) on the Ethereum blockchain.
When a prosecutor brings criminal charges against an individual or group and accuses them of committing an offense, this is referred to as a charge. However, an indictment is filed by a grand jury if prosecutors are successful in persuading a majority of the grand jury members that a formal accusation is warranted following an investigation.
The use of grand juries is widespread practice in the prosecution of significant federal and state criminal crimes.
Elizabeth Warren, a senator in the United States who is well-known for her scepticism regarding cryptocurrencies, recently issued a call to action for the Securities and Exchange Commission (SEC) to “double down” on its attempts to regulate virtual currencies. She did so by urging the SEC to “double down” on its attempts to regulate virtual currencies. She is drawing attention to the fact that those involved in the bitcoin industry are now doing their business “scared” of what is going to happen by behaving in this way.
The words that Warren made were a part of an interview that took place on January 25 with the American Economic Liberties Projects. The interview was conducted by the American Economic Liberties Projects. It was Elizabeth Warren who first brought up these accusations.
The senator was of the opinion that ever since Gensler was inaugurated in as chairman of the SEC in April 2021, the Commission “has made a decent start” toward repairing some of the issues that were caused by the previous leaders of the SEC during the time that the Trump Administration was in power. This statement was made in reference to the fact that Gensler took over as chairman of the SEC in April 2021. This comment was made in response to the fact that Gensler assumed his position as chairman of the SEC in April of 2021. The senator believed that this was the case and expressed his opinion as such.
Warren stated that the previous administration of the SEC “basically gave the green light” to set up a market for cryptocurrencies that was “full of garbage tokens, unregistered securities, rug pulls, Ponzi schemes, pump and dumps, money launderings, and sanctions evasions.” Warren was referring to the fact that the market for cryptocurrencies was “filled with garbage tokens.” When Warren said that the cryptocurrency market was “packed with trash tokens,” he was alluding to the fact that the market was flooded with worthless tokens. When Warren referred to the market for cryptocurrencies as being “stuffed to the gills with garbage tokens,” he was making a reference to the fact that the market was awash with tokens that had no value.
The United States Securities and Exchange Commission (SEC) has filed charges against 11 alleged masterminds of the popular Forsage crypto pyramid and Ponzi scheme.
As announced by the commission, the charges were filed in the United States District Court in the Northern District of Illinois, and it involved four of the platform’s founders living outside of the US and 11 residents in America.
The Forsage platform was launched as an investment outfit on Ethereum but later launched on the Tron and BNB Chain. Through the scheme, investors earn money only when they onboard other people into the scheme, and through the aid of smart contracts, the investment protocol also rewards people from overflows through a series of downlines.
According to the SEC, the 4 masterminds, Vladimir Okhotnikov, Jane Doe a/k/a Lola Ferrari, Mikhail Sergeev, and Sergey Maslakov, launched Forsage.io and contracted the other defendants to help in promoting the scheme across the board. The Forsage platform was reportedly marketed and opened access to US residents without regard for the underlying securities laws.
The regulator said the Forsage defendants continued with the promotion of the platform despite warnings from the Securities and Exchange Commission of the Philippines and in March 2021 by the Montana Commissioner of Securities and Insurance.
“As the complaint alleges, Forsage is a fraudulent pyramid scheme launched on a massive scale and aggressively marketed to investors,” said Carolyn Welshhans, Acting Chief of the SEC’s Crypto Assets and Cyber Unit. “Fraudsters cannot circumvent the federal securities laws by focusing their schemes on smart contracts and blockchains.”
While the case is now opened, the four masterminds are not yet in court. However, two of the remaining defendants, Samuel D. Ellis of Louisville and Sarah L. Theissen of Hartford, Wisconsin, have agreed to pay civil fines that the judge will determine.
Fraudulent schemes featuring cryptocurrencies have been making the rounds in recent times. In like manner, the founder of OneCoin, Ruja Ignatova, has been placed on the list of the 10 most wanted criminals in the world by the Federal Bureau of Investigation (FBI).
Two suspected cryptocurrency fraudsters Sam Ikkurty of Portland, Oregon, and Ravishankar Avadhanam of Illinois have been charged by the United States Commodity Futures Trading Commission (CFTC) for illegally soliciting as much as $44 million through Ponzi-like scheme.
According to the Commodity and Futures regulator, both suspects utilized the social video streaming platform, YouTube to solicit funds from investors with the promise of investing the capital pool and paying out profits. The CFTC said the complaints it filed against both men allege that instead of investing the pool funds, the capital was being redistributed amongst signed participants in a scheme that can only be termed Ponzi Scheme.
The CFTC update showed that at least 170 people have fallen victim to the gimmicks from the two and that some of the funds which were intended for circulation were being used for their personal gains.
While a status hearing is scheduled for May 25, the CFTC said it is charging the duo for the fraud and for operating a community investment pool without appropriately registering such with the commission.
The CFTC now wants restitution for defrauded customers, “disgorgement of ill-gotten gains, civil monetary penalties, permanent trading and registration bans, and a permanent injunction against further violations of the Commodity Exchange Act (CEA) and CFTC regulations.”
The majority of the enforcement actions being carried out by the CFTC is largely centered on the cryptocurrency ecosystem. Irrespective of the scale, the CFTC is notably playing a vital role in cracking down on cybercriminals, especially those looking for safe haven in digital or virtual assets.
Amongst the high-profile cases of law enforcement, the CFTC has handled in recent times includes the placement of LedgerX co-founders on leave following deep scrutiny from the commission. BitMEX exchange was also charged for operating an illegal crypto derivatives brokerage in the US for which it later paid $100 million in fines back in August last year.
Mining Capital Coin CEO Luiz Capuci Jr has been indicted on Friday for orchestrating a scam that defrauded investors around the world of about $62 million, according to the U.S. Department of Justice.
Luiz Capuci Jr used cryptocurrency mining and investment platform Mining Capital Coin, or MCC for short, to defraud investors of their money by selling “mining packs” for a handsome profit.
The company claims to be able to quickly mine sizable cryptocurrencies through its platform’s network of crypto miners. More than 65,000 investors have been victimized since January 2018.
Capuci convinces investors that MCC’s own cryptocurrency, “Capital Coin,” is run at “very high frequency, capable of thousands of transactions per second,” by a “BitConnect trading bot” and provides daily returns
In fact, according to the indictment statement, it was an elaborate textbook Ponzi scheme that also allegedly ran a pyramid scheme, recruiting promoters to sell mining packages and promising gifts of great value, from Apple Watches to Ferrari sports cars and more.
Assistant Attorney General Kenneth A. Polite, Jr of the Department of Justice Criminal Division said;
“Cryptocurrency-based fraud undermines financial markets worldwide as bad actors defraud investors and limits the ability of legitimate entrepreneurs to innovate within this emerging space,”
If convicted, he could face up to 45 years in prison. Crypto Ponzi schemes have been on the rise, even entering the market through traditional financial banking institutions.
A U.S. grand jury also indicted Satish Kumbhani, the founder of BitConnect, for orchestrating a fraud scheme that siphoned approximately $2.4 billion from investors, according to the Department of Justice.
A U.S. grand jury indicted Satish Kumbhani, the founder of BitConnect, orchestrating a fraud scheme that siphoned approximately $2.4 billion from investors, according to the Department of Justice.
The 36-year-old from Hemal, India, with his co-conspirators, deceived investors’ money to gain substantial profits by taking advantage of the volatility of crypto exchange markets through BitConnect’s “Lending Program.”
Hemal convinced investors that the program was powered by a cutting-edge technology called the “BitConnect Trading Bot” and “Volatility Software.”
In reality, according to the indictment, it was a well-orchestrated textbook Ponzi scheme where earlier BitConnect investors were paid using money from later investors.
Before going underground in 2018, the cryptocurrency scam had hit a peak market capitalization of $3.4 billion, and this was attained through the manipulation of its digital currency called BitConnect Coin (BCC).
Despite being large, Kumbhani was charged with various counts, such as operating an unlicensed money transmitting business and conspiracy to commit wire fraud and international money laundering. If convicted, he could be incarcerated for a maximum of 70 years.
Eric Smith, a special agent in charge of the FBI’s Cleveland Field Office, noted:
“Today’s indictment reiterates the FBI’s commitment to identifying and addressing bad actors defrauding investors and sullying the ability of legitimate entrepreneurs to innovate within the emergent cryptocurrency space.”
Ryan Korner, a special agent in charge of the IRS Criminal Investigation’s office in Los Angeles, added:
“As cryptocurrency gains popularity and attracts investors worldwide, alleged fraudsters like Kumbhani are utilizing increasingly complex schemes to defraud investors, oftentimes stealing millions of dollars.”
Kumbhani’s indictment comes months after crypto worth $57 million was seized from Glenn Arcaro, a top American-based BitConnect promoter. Victims were to benefit from the liquidation of the crypto assets after a court gave the go-ahead.
Fees.wtf is a simple service that shows Ether (ETH) users their lifetime spend on Ethereum blockchain transactions by measuring gas. You plug in your wallet address on their website and they tell me how much gas you spent.
The project released their token, WTF, in an airdrop Friday at midnight. Essentially, users would be able to claim WTF tokens as well as a “Rekt” NFT for 0.01 ETH. The Rekt NFT grants lifetime access to the pro version of fees.wtf.
According to their Discord announcement, the initial launch would offer 100 million of WTF and the “circulating supply will be the main attraction in the tokenomics.” However, it didn’t quite go to plan.
Following a series of frantic trading behavior between bots in the opening hours of the airdrop, one bot ran off with a reported 58 ETH, or $180,000. On Etherscan, 58 ETH was drained from the wrapped ETH (WETH) to the WTF liquidity pool.
Social media channels were quick to respond because many airdrop participants lamented losing thousands of dollars in ETH. The WTF team chimed in two hours after the airdrop to calm their ranks:
“Immediately on launch there was only a tiny bit of liquidity and there were ape bots that were chucking in 100s of ETH into a pool with an ETH or two of liquidity. They also had high slippage and ended up being sandwiched by the other bots which essentially drained all their ETH.”
Basically, within five minutes of the token launch, poor liquidity pool management from the WTF devs left the liquidity pool exposed. As there was low liquidity, bots were able to manipulate the price of WTF to then sell for WETH.
The bots would battle it out till one winner would take home the pot. In effect, the bot stole from users who provided liquidity to the pool, trying to claim their WTF tokens and Rekt NFT. The victor managed to send an “ultra-fast transaction at 3,000 Gwei”, making a 6x return on their initial investment.
The WTF team sent out another Discord update two hours after the airdrop, stating that “The core contracts are all fine, this was a war on Uniswap.” The team added, “We hope no one was affected by it.” However, as has become a common occurrence in airdrops of late, lots of users lost a lot of money.
The price graph of the token since launch paints a thousand words. The initial spike shows the bot activity, swiftly followed by a 10x loss in value.
The official WTF Discord group is brimming with users sharing stories of losing money. Some are “shaking” with rage while death threats and lawsuit claims are rife.
One Etherscan transaction points to one user losing 42 ETH, or $135,000, for 0.000044170848308398 WTF, effectively $0.01.
As daylight dawns on the project, some Twitter users have called out the project as a Ponzi scheme. The referral element to the project is spurious. Referrers of the WTF project claim a 50% on fees “to make wtf go viral,” while the WTF team earns 4% from each transfer. In total, the WTF team claimed almost half a million in token transfer fees in a little over 8 hours.
Twitter user Lefteris Karapetsas didn’t mince his words:
Summing up.
WTF “team” made an app any dev can do in 1 hour
Slapped a token + ponzinomics on it
Anons aped without thinking and lost ETH in gas and claim fees
Team has so far made 116 ETH + 6,168,806 WTF. Roughly around $855,665 and this is getting bigger by the second
— Lefteris Karapetsas | Hiring for @rotkiapp (@LefterisJP) January 14, 2022
The WTF project states merely that the supply of tokens is “deflationary”, and that 40 million WTF tokens will go to their treasury. There is not a great deal of detail regarding the token distribution. Meows.ETH concluded their Twitter thread with a zen approach to the controversial project launch:
“If you were fortunate enough to claim a big amount of $WTF and cash it out for a profit, be happy. Unless you’re attempting to bot the initial liquidity, don’t FOMO into buying a newly launched altcoin with high slippage.”
This year has been monumental for the cryptocurrency sector in terms of mainstream adoption. A recent report published by Grayscale Investments found that more than one-quarter of United States investors (26%) surveyed own Bitcoin (BTC), up from 23% in 2020. With the holidays around the corner, financial services provider MagnifyMoney also found that nearly two-thirds of surveyed Americans hope to receive cryptocurrency as a gift this year.
While crypto’s growth is notable, there has also been an increase in the number of scams associated with digital assets. A Chainalysis blog post highlighting the company’s “2022 Crypto Crime Report” revealed that scams were the dominant form of cryptocurrency-based crimes by transaction volume this year. The post notes that over $7.7 billion worth of cryptocurrency has been taken from scam victims globally. According to Chainalysis’ previous research, this number represents an 81% increase compared to 2020, a year in which scamming activity dropped significantly compared to 2019.
Source: Chainalysis
Scams are the biggest threat for building trust in crypto
Kim Grauer, head of research at Chainalysis, told Cointelegraph that while there are many different crypto-related crimes, scamming has become the largest in terms of value received by criminals. She added that scams represent a significant threat to building trust within the crypto ecosystem, as this may prevent people from investing in digital assets.
Grauer further mentioned that scams related to decentralized finance (DeFi) have been on the rise this year. With an annualized revenue in all DeFi protocols estimated at around $5 billion, this shouldn’t come as a surprise. More interesting, though, is that Chainalsyis has discovered that “rug pulls” have contributed to this year’s increase in scam revenue. According to Grauer, Chainalysis defines rug pulls as an instance when a person or developer decides to unexpectedly cease a project and run away with funds:
“Rug pulls have accelerated the amount of scamming the crypto space has seen this year. In addition to financial scams, rug pulls have exploited different vulnerabilities in the crypto space. Overall, they have taken $2.8 billion of cryptocurrency.”
Although rug pulls are a relatively new crime, Grauer believes these cases are becoming common in the growing DeFi ecosystem. To put this in perspective, the Chainalysis blog post notes, “Rug pulls have emerged as the go-to scam of the DeFi ecosystem, accounting for 37% of all cryptocurrency scam revenue in 2021, versus just 1% in 2020.”
The Chainalysis blog post also provides examples of some of the biggest rug pulls of 2021. For instance, the AnubisDAO case is mentioned as the second-biggest rug pull of this year, with over $58 million worth of cryptocurrency stolen. According to the post, AnubisDAO launched on Oct. 28, 2021, with claims of offering a decentralized currency backed by a number of assets. However, the project didn’t contain a website or white paper, and all of the developers went by pseudonyms. Miraculously, AnubisDAO still managed to raise nearly $60 million overnight, yet 20 hours later, all of those funds disappeared from AnubisDAO’s liquidity pool.
While AnubisDAO demonstrates a large-scale DeFi rug pull, new cases are occurring almost daily. An early Ethereum and DeFi investor who wishes to remain anonymous told Cointelegraph that they fell victim to a rug pull on Dec. 19, 2021. The anonymous source shared that the project is called “up1.network,” noting that many early Ethereum investors were discussing Up1 in a Discord chat group. They added:
“People I trusted were mentioning the project so I checked it out. I thought it was strange to see Up1 giving away airdrops, but thought it could have been affiliated with a DeFi token I had. I then connected my MetaMask wallet and clicked on ‘get airdrop’ but kept getting an error message. I did this three times, which gave the project access to my account.”
Unfortunately, once Up1 gained access to their account, three DeFi tokens worth $50,000 were instantly taken. “I revoked access after the fact on Etherscan so they couldn’t steal any more tokens,” they mentioned. The Ethereum investor then checked the DeFi platform Zerion where they saw the notifications that the DeFi tokens had left their wallet. Zerion also provided them with a wallet address to where the funds went, along with a message:
“0xc28a580acc42294787f44cffbaa788eaa4958056; You gave a web3 site / smart contract unlimited access to your funds (check who you gave access to and revoke here).”
While both AnubisDAO and Up1 are examples of DeFi rug pulls, it’s important to point out that the nonfungible token (NFT) ecosystem is also vulnerable to rug pulls. Most recently, the Bored Ape Yacht Club community fell victim to a rug pull when some members decided to connect their wallets to mint NFTs from a link posted in the group’s Discord channel.
Even more surprising is that rug pull scams are also targeting mainstream NFT projects. For example, on Oct. 28, 2021, the global beauty pageant Miss Universe sent out an official tweet announcing the launch of its NFTs on the Wax blockchain. Unfortunately, the people who minted these nonfungible tokens were part of a rug pull.
As a reminder: DON’T MINT from the links posted in Discord.
Due to amazing members of the community, we’ve obtained pertinent information about the hackers.
We’re working diligently to fix this. Priorities are restoring the server, prosecuting, and making it up to the minters
— Jenkins The Valet (@jenkinsthevalet) December 21, 2021
Jessica Yang, an NFT photographer, told Cointelegraph that when Miss Universe announced the launch of an NFT project, she didn’t question whether it was a scam or not because the pageant is widely known. “The price of each NFT was 0.06 Ethereum. That translates to around $230 for one. The artwork also has the beauty contestant’s face and country they are associated with plastered on it,” she remarked.
Yang also mentioned that the project was geared toward women, noting that Paula Shugart, the president of Miss Universe, previously stated:
“Miss Universe is going to be the first brand in the NFT space that is about women, about women’s empowerment, and embracing the technology, and moving forward. I love it; this is the first one that is away from other more male-oriented spaces.”
Given the brand’s reputation and appeal, Yang and many others minted Miss Universe NFTs, connecting their wallets to the platform. Yet Yang noted that the next day, Miss Universe deleted its official Instagram account. She then noticed that her funds disappeared entirely. Yang added:
”One red flag I saw was coming from their Discord. The moderators kept trying to get everyone to buy Miss Universe NFTs, promising that they were going along with the roadmap. Their roadmap promised monthly AMAs, signed prints, and much more. Even Steve Harvey vetted the project.”
Do your own research
As the DeFi and NFT ecosystems continue to mature and grow, these environments will, unfortunately, be prone to rug pull scams until industry solutions are developed. In the meantime, the best course of action is for users to do their own research.
For instance, Grauer shared that every DeFi project should have a code audit available to make investors feel safer. “Many of the DeFi platforms that have been hacked don’t have code audits,” she remarked. The Chainalysis blog post also pointed out that “rug pulls are prevalent in DeFi because with the right technical know-how, it’s cheap and easy to create new tokens on the Ethereum blockchain or others and get them listed on decentralized exchanges (DEX) without a code audit.”
In addition to code audits, the anonymous Ethereum investor shared that after reviewing the Up1 site more closely, they could tell that it was fake. “For instance, the team was all anonymous, with just first names that couldn’t be clicked on to open a Twitter or LinkedIn profile.” Even with these precautions the anonymous source mentioned that wallet providers also need to do a better job of keeping users safe:
“If there is a questionable site, wallets should seek them out. I believe this technology can scale, but it has to be able to handle these scams. Otherwise, people will lose all their money.”
Following the Up1 rug pull, the anonymous source contacted MetaMask and shared that they got a response noting that it would flag the website.
It’s also important to point out that while a clear industry solution is yet to be developed, Grauer noted that, unlike fiat-related crimes, crypto payments can be traced to their source. With this in mind, she added that some cryptocurrency platforms are starting to take action to keep users safe from scams.
For example, crypto exchange Luno partnered with Chainalysis in 2020 to protect against a scam targeting South African crypto users. Eva Crouwel, head of financial crime at Luno, told Cointelegraph that one of the requirements from a regulatory framework point of view is to be able to monitor and act upon transactions that have a suspicion of money laundering, terrorist financing, sanctions or any other type of illicit activity. She noted that on-chain transactions must be monitored, as well as the design and the development of case management and user interface.
In terms of crypto investors keeping themselves safe from scams, Crouwel recommends staying away from offers that sound too good to be true, adding:
“Start by doing as much due diligence as possible. Look at the company’s/token’s social media profiles to see what other users’ experiences have been. You should also go through the company directors’ personal social media pages and look into their industry connections and employment background so ensure their history is sound.”
