Another cryptocurrency fraud, and another scam. We would perhaps get over this soon, to face something similar in the near or distant future. Here, we shed light on the Squid Game crypto fraud and the red flags which most investors probably failed to notice
Listen to this article
There is no denying the fact that ‘Squid Game’ is an expression of epic proportions. It was one of the most watched shows on Netflix ever, but sadly, a crypto token by the same name (with no relation to the show’s makers) created another record – for the wrong reasons.
After rising by 3,000 percent in three days, the crypto token crashed to zero after the token developers did the rug pull. This is now seen as one of the major scams in the crypto world.
The CoinMarketCap website says a ‘We have received multiple reports that the website and socials are no longer functional and users are not able to sell this token. There is growing evidence that the project is rugged. Please do your own due diligence and exercise extreme caution.’
According to CoinMarketCap’s Molly Jane Zuckerman, it was a ‘rug pull’ wherein the token developers leave the market taking their investors' funds with them.
When the crash happened, over 40,000 people held the tokens according to BScSCan, a blockchain analytics platform.
Charlie Bilello, Founder and CEO of Compound Capital Advisors, in a November 2 tweet, chronicled the rise and fall story of the infamous token.
He wrote that the Squid Game crypto rose from $38.19 at 1.35 am to $434.70 at 4:35 am to $2,856.64 at 5.35 am, before crashing to $0.0007926 at 5.40 am. So, practically, it fell from $2,856 to zero in a few moments.
Right before the token disappeared from the crypto universe, the ‘Squid Game’ crypto token developers posted on telegram group that ‘Someone is trying to hack our project these days. Squid Game Dev doesn’t want to continue running the project as we are depressed with the scammers...’
Do not ignore red flags
As analysts and investors dissect the episode, they are pointing at a range of red flags in the project which the impatient investors refused to see or acknowledge.
“It is very important for investors to research new token projects before investing. There were several red flags for Squid token including the numerous spelling and grammatical errors in the project’s whitepaper as well as the website only being registered 1 month ago," said Kapil Rathi, CEO and founder of CrossTower.
Another red flag was that the token is related to a famous game based on a Netflix show, and it was quite intriguing and strange that the crypto developers had no relationship to the makers of the show.
The biggest red flag was there for all to see in the form of inbuilt tools that made selling of tokens far harder than buying them.
The developers required the token holders to buy another cryptocurrency Marbles before they could sell the tokens. Marbles could be earned by taking part in an online game inspired by the show. To participate in the game, players were asked to pay an entry fee of 456 Squid Game tokens.
“Generally, tokens that impose large penalties on sellers as a mechanism to discourage any selling is a red flag that investors should watch out for, as these types of mechanics interfere with price discovery and lead to artificial valuations," added Kapil Rathi.
Also, the white paper required the buyers to be in the ratio of 2:1 against sellers before a sale could materialise in an ‘anti-dumping’ mechanism.
These stumbling blocks created in the process of sale of tokens might appear harmless but were meant to artificially inflate the price with too many prospective buyers against a declining number of ‘eligible’ sellers.
The crash of Squid exemplifies the lack of regulations in the crypto space.
In the wake of ‘Squid Game’ crypto token scam, the following adage holds true, ‘When you play stupid games, you win stupid prizes.’ One must stop getting lured by these traps. Investing in cryptocurrency is not entertainment per se, it’s a pure financial investment. The millennials shouldn’t forget this.
Subscribe to Mint Newsletters
* Enter a valid email
* Thank you for subscribing to our newsletter.
Never miss a story! Stay connected and informed with Mint.
our App Now!!