Ghrist suspects he’s gotten rug-pulled, soft-rugged and even fallen victim to a honey pot—when a seemingly legitimate coin sets up a trap, like the inability for investors to sell once they’ve bought in. Ghrist says he wanted to trade the momentary 1000% gain of a coin launch called Space Jupiter but couldn’t sell for about 20 minutes. He says the creators of the coin eventually re-enabled selling, but only after the coin price had slumped and after he suspects they had taken gains for themselves.
“It’s pretty much hit-or-miss wherever you go,” says Ghrist, who typically works from his bed with two laptops. He says he’s pulled all-nighters and worked 48 hours straight moiling for meme-coin gold.
In picking his meme coins, he considers a range of factors to minimize risk. One is the number of social media accounts a coin has (legit coins, he says, tend to have more than dodgy ones). Another is whether those accounts are public or private (he says public is safer than private): how much time those accounts spend chatting with investors (more is better than less). Then he looks at what’s happening in Telegram groups, known in meme-coin-speak as “shilling groups.” When the whole package looks slapdash, that’s a bad sign, he says.
Ghrist feels scammed at times, but he’s pressing on too. “When I feel that fear of losing my money, because I know I might, I also balance that with I might make five times my money or three times my money,” he says. “You can literally do 30 times or more if you if you get a coin that lasts more than a day.”
The biggest crypto heist on record came to light only recently, and it appears that one was neither a rug-pull nor a soft-pull nor a honey pot. It looks like an old-fashioned Ponzi scheme. In April, two bothers in South Africa said their crypto investment platform had been hacked. Then they vanished—along with an estimated $3.6 billion of Bitcoin. Lawyers who’d been working for the men, Raees and Ameer Cajee, said on June 29 that they were no longer representing them and didn’t know where they were. The previous record-holder involved the Chinese crypto wallet and exchange PlusToken. According to Chinese authorities, PlusToken users were bilked out of more than $2 billion in another Ponzi scheme. Last November, the ringleaders were sentenced to between two and 11 years in prison.
Mostly, though, authorities around the world are struggling to keep pace. A decade after Bitcoin was created, regulators are still grappling with how to police cryptocurrencies when the whole point is that they operate without governments or central banks. As more institutions and ordinary investors dip their toes into crypto—and, despite all the wild gyrations, more probably will—new scams are bound to emerge.
“Cryptocurrency is entering a new phase,” says Kim Grauer, head of research at Chainalysis. Technology is improving. Trading is getting easier. Institutions and ordinary investors who once wouldn’t go near crypto are bound to take a long view and give it a try at some point. The Bank for International Settlements, the central bank for central bankers, just laid out tough capital standards for banks looking to deal in Bitcoin. It was a nod to the patently obvious—Bitcoin is risky—but also a recognition of cryptocurrencies’ new place in the financial order.
The Wolves of Crypto know all this, too. Somewhere out there, The Money Chant runs on.
During the pandemic in the U.S., boredom, social media and old-fashioned greed has had people running in and out of crypto and meme stocks. Elon Musk tweets, and prices soar or swoon. Michael Burry, of “The Big Short”-fame, has been warning all of this could all go horribly wrong. An estimated 10,000 new coins have been minted this year. Who can say how many will turn out to be shams? So many Shit Coins are flying around out there, and prices can be so volatile, that many people can’t even tell if they’ve been scammed. The bad guys often cover their tracks by blending identifiable cryptocurrencies with anonymous ones, an old money-laundering maneuver known as “mixing” or “blending.” They engage in “peel chains,” which involve skimming a little crypto here, a little there, and routing it to different digital wallets on different exchanges.
And Jason Gottlieb, a partner in New York at the law firm Morrison Cohen, whose practice focuses on regulatory enforcement and cryptocurrencies, says some people tar particular coins for their own nefarious ends. “You also have purely malicious people who go on and they say project X is a scam because they’re actually working for project Y that’s a competitor, or they’re working for trolls,” Gottlieb says.
This much is sure: no one complains when they’re making money. It’s when people start losing money—and lately, many have been—that they scream they’ve been taken.
“When the price goes up, people don’t ask as many questions,” says Tyler Moore, a cybersecurity professor University of Tulsa who’s studied cryptocurrency scams. “And then you see the flip side when things go down.”
This article was provided by Bloomberg News.