Surge in Fraudulent Cryptocurrency Tokens: Over 350 Scam Tokens Created Each Day in 2022

According to blockchain risk monitoring firm Solidus Labs, the first 11 months of 2022 witnessed the emergence of more than 350 fraudulent cryptocurrency tokens created per day, resulting in millions of dollars lost for unsuspecting investors. This alarming trend has drawn attention to the growing concerns over the safety and security of the cryptocurrency market.

Rising Numbers of Scam Tokens

Data reveals that from the start of the year to December 1, a staggering 117,629 “scam tokens” were deployed, marking a significant 41% increase from the nearly 83,400 scams detected in 2021. This trend underscores the ongoing challenges faced by crypto investors, as the blockchain space struggles with a high volume of fraud.

Where Are the Scams Happening?

Analysis indicates that the BNB Chain hosts the highest number of scam tokens, with an estimated 12% of all BEP-20 tokens being classified as fraudulent. Ethereum follows closely, with an alarming 8% of ERC-20 tokens alleged to be scams. This statistic raises concerns about the security measures in place across various blockchain networks.

The Nature of Rug Pulls

Rug pulls are a particular form of crypto exit scam where the creators inflate a token’s price before draining its value, leaving investors in the lurch as prices plummet to zero. Solidus Labs highlighted that nearly 2 million investors have fallen victim to such scams since September 2020, which is a greater number than the estimated 1.8 million affected by the bankruptcies of crypto exchanges and lending platforms like FTX and Voyager.

Popular Scams: Honeypots and CEX Involvement

The report indicated that honeypot scams, which prevent buyers from reselling their tokens, were the most common type of fraudulent tokens. One notorious example is the $3.3 million “Squid Game” (SQUID) token scam, which saw a whopping 45,000% price surge in mere days before the anonymous founders vanished with investors’ funds.

Additionally, centralized exchanges (CEXs) have also been affected, as many fraudsters use these platforms to fund their malicious activities and cash out their profits. Solidus Labs reported that around $11 billion worth of Ether (ETH) from scam tokens moved through 153 CEXs since September 2020, with a significant portion of transactions occurring on U.S.-regulated exchanges.

Conclusion

The growing incidence of fraudulent cryptocurrency tokens highlights the urgent need for increased regulatory oversight and protection for investors. As the crypto market continues to evolve, stakeholders must work together to combat fraud and create a safer environment for all participants. With the right measures in place, the industry can regain trust and encourage responsible investment.