Blockfence, a Web3 security company, has reported that since April 2023, a sophisticated, automated scam operation has created over 1300 fraudulent crypto tokens and scammed up to $32 million from more than 42,000 victims.
These scams are mostly automated, with fraudsters typically creating fraudulent tokens by impersonating companies or projects that have not yet announced tokens, and then introducing fake trading volume to lure traders. Once enough legitimate funds are attracted, the scammers begin cashing out these tokens and repeat the process.
While the contracts of these scam tokens may appear to have passed multiple security measures, the operators behind the scams still retain some abilities, including the ability to arbitrarily destroy tokens held by holders, mint unlimited tokens for the scammers (even though the tokens appear to be locked), and forge the maximum supply of tokens.
One of the authors of this Blockfence investigation report, Pablo Sabbatella, stated that he began investigating these scams after a scam group launched a token named after his company, Blockfence. According to him, scammers seem to intentionally limit the profits of each scam token to between 5 and 20 ETH (Ethereum), which helps them avoid attracting too much attention.
How to avoid being scammed?
How can cryptocurrency traders protect themselves in similar scams? Sabbatella suggests that the first step is to not trade suspicious tokens, stating, “I absolutely will not buy or invest in assets that I do not understand.”
However, for traders willing to take risks, Sabbatella recommends using various fraud detectors, saying: