The business’ CEO, Faruk Faith Ozer, quickly released a public statement claiming they had to temporarily shut down the platform due to a spate of cyber-attacks. Soon after, he mysteriously disappeared, and Thodex never re-enabled trading.

This is a very rare example of rug pulls occurring in centralized finance. All in all, an estimated $2 billion USD was stolen from the exchange’s customers.

Squid Game Token

The Korean TV drama Squid Game took the world by storm in 2021. It spawned a legion of followers and hype surrounding the show – something that a group of scammers took advantage of.

Aligning with the popularity of the associated Netflix show, Squid Game Token ballooned from being worth less than a cent to an absurd $2,856 USD in just a few weeks.

However, there were two major issues.


It’s this very same functionality that forms the foundation of the entire DeFi ecosystem.

Unfortunately, smart contracts are exploitable. Experienced coders can deploy code that only allows a newly-minted altcoin to be sold from a specific address.
This means investors will dive into supporting a new project, only to find when they try and swap the coin, they are prevented from doing so.

As more people begin to buy the token, its value will likely jump – especially because only a select few people can sell it. Once the coin reaches a certain price point, the bad actors can sell off their tokens and make off with all of the investor’s money.
Again, all that’s left behind is a worthless token that cannot be sold.

Dumping

Dumping is the only type of rug pull scam that isn’t unique to cryptocurrency.

Privileged functionalities appear in the identified smart contracts.

The team is looking into it.

DO NOT interact with the project! pic.twitter.com/MhxN92jZH8

— CertiK Security Leaderboard (@certikorg) January 4, 2022

The operators of Arbix also moved $10 million in funds deposited by users to “unverified pools,” where they were converted to Ethereum.

The scammers then transferred the Ethereum to Tornado.cash, which acts as a mixer to make it harder to trace the funds.

“Tornado Cash improves transaction privacy by breaking the on-chain link between source and destination addresses. It uses a smart contract that accepts ETH deposits that can be withdrawn by a different address,” explains Tornado.cash’s frequently asked questions page.

“To preserve privacy a relayer can be used to withdraw to an address with no ETH balance.

Generally, there are 3 types of rug pull:

  • Stealing liquidity. In this type of rug pull, the scammers will create a liquidity pool with their token and pair it with top cryptocurrencies such as ETH or BNB.


    They will provide a large number of tokens to the pool and attract people to swift the tokens with their ETH or BNB, which will be locked up in the liquidity pool for a period of time. The more investors swift the token, the price of the token increase, which results in more ETH or BNB added to the pool.
    At last, the creator will “pull” all the ETH or BNB from the liquidity pool, leaving worthless tokens to the investors.

  • Manipulate with technical. The developer can write a few lines of code to make the investors unable to sell or spend the tokens.

For those who wish to learn more about the action JetFuel took, refer to this medium Medium post.Editors note: It was initially stated that JetFuel had performed a token sale or IJO for the TTDX token but this information was incorrect and has since been amended

It is alsoworthy of note that JetfuelFinance has issued both an official tweet and post immediately it got wind of the rugpull event and has taken further steps to launch a fund recovery process by opening two Telegram groups HERE and HERE.

Possible Recovery

There might be some glimmer of hope for the TurtleDex investors following the active recovery process of the JetfuelFinance team.

You may have heard the common phrase “pump and dump” among crypto investors.

This scheme involves a developer, or anonymous investors, generating hype around their new token to drive its price upwards. After the coin becomes valuable enough, the scammer will then “dump” (sell) their portion of the token.

In most schemes, the scammer(s) will own a significant percentage of the cryptocurrency’s total supply.

The huge sell-off will wipe out most of the gains the coin initially made and will often trigger another massive sell-off from panicking investors. By the time it’s all said and done, a pumped and dumped coin will pretty much be worthless.

Interesting Fact

Pump and dump scams have long plagued penny stocks on share markets around the world.

This scheme is considered fraud, and illegal when done in a traditional financial market.

And the price quickly pumped above its pre-sale value.

The Rugpull Event

How was the rugpull achieved? The incident was first reported in the following Tweets by Twitter user DefiStalker:

Liquidity on both@ape_swap&@PancakeSwaphas been removed 10hrs ago & swapped to$ETH, split to 9 wallets, all sent to@binance. $TTDXlooks like it’s about to#RugPulljust 24hours after pre-sale@BinanceChain.”

A BSCscan activity from the team’s wallet shows the actual movement of the swapped $ETH into the Binance Exchange CEX platform.

As of this report’s time, the website is now offline, and the telegram group placed on mute.

However, it is not regulated the same way in cryptocurrency. Dumping crypto is considered unethical, but not necessarily illegal.

Hard rug pulls vs.
soft rug pulls

Rug pulls are often referred to as being either “hard” or “soft”.

Hard rug pulls encompass liquidity theft and limit selling order scams. These rug pulls are outwardly malicious and involve a concentrated effort to defraud investors.

The projects embroiled within hard rug pulls are never intended to succeed.

Conversely, soft rug pulls aren’t quite as black or white and aren’t necessarily intentional scams. Pump and dump schemes are considered a soft rug pull.

While investors will often lose out big on a soft rug pull, the token isn’t always unsalvageable. Holders can still sell and swap the leftover coins, albeit at a hugely reduced value.

Employees” would get paid for referring new customers to the scheme, and so on.

However, it turned out that OneCoin was never publicly traded and could only ever be sold on the OneCoin Exchange which had strict selling limits. Eventually, the exchange was shut down, and investors were left with tokens that were practically worthless.

The rug pull lasted for 5 years, operating between 2014 and 2019. In that time, it’s estimated that $4 billion USD (approx. $5.8 billion AUD) was stolen from investors.

Thodex

Thodex operated as a centralized exchange out of Turkey, allowing customers to buy, sell and swap various cryptocurrencies. One day in late 2021, the exchange’s users woke up to withdrawals being disabled on the platform.

Regret over not buying the latest coin to produce huge returns drives people to buy another coin that might be the next big thing.

We’ve found one company that’s positioned itself perfectly as a long-term picks-and-shovels solution for the broader crypto market — Bitcoin, Dogecoin, and all the others. In fact, you’ve probably used this company’s technology in the past few days, even if you’ve never had an account or even heard of the company before.

That’s how prevalent it’s become.

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Here’s where SQUID checked a lot of boxes.

Because it is still in operation, so it is obviously legal but just immoral.

Why Crypto Rug Pulls Happen in DeFi?

DeFi means no central authority and just runs on smart contracts, everyone can list tokens on Decentralised Exchange(Dex) without audit. So the scammers can just create a token, promise the utility of the token and list them on Decentralised Exchange(Dex) such as Uniswap or Pancake.

Then they use Telegram or Twitter to recruit investors to buy it. Once money flow to the project, the value of the token pulls up, creators sell these tokens and make the value of the tokens zero.

What Are the Famous Examples of Crypto Rug Pulls?

  • Squid game (SQUID)

Squid game(SQUID) token is the latest rug pull which happened in November.

It is the token inspired by the popular TV series Squid Game.

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