"Be careful when buying Squid tokens. The names of the biggest buyers are quite similar. It can't be a coincidence," wrote Nroj90 on X with a photo of 11 addresses holding Squid coins from the SquidGamesSolana project.
This person commented that the wallet addresses holding the token volume and the transaction process "look similar" meaning that it is being distributed to a small number of people, or even just one person. Therefore, the person behind it may immediately sell the token when attracting many players, causing the price to collapse.
A token based on the movie Squid Game lost 80% of its value in two days. Photo: Bao Lam
In the cryptocurrency industry, this is called a rug pull - a term used to describe a cryptocurrency development team suddenly abandoning a project and taking all the money that investors have invested in. This type of scam has been around for a long time, but has remained popular recently, especially in projects related to decentralized finance (DeFi).
According to statistics from DexScreener , after Netflix released Squid Game season two on December 26, there were about 50 tokens related to the show recorded trading with volumes ranging from a few hundred to nearly $7 million. The tokens were mostly created in December, but some have been around since 2021 when the first season debuted.
Most of them increased rapidly but then lost 50-80% of their value in a short period of time. Five tokens lost more than 95% of their value, and one token deployed on the Base blockchain dropped 99% in just three hours.
Some of the tokens related to Squid Game recorded by DexScreener have been around for a few days to three years .
On December 28, blockchain security company PeckShield also warned about fraudulent tokens following Squid Game "blooming, uncontrolled" and advised players not to trade to avoid losing all their money.
In 2021, many people lost money to related scams. Bernard, a cryptocurrency investor in Shanghai, lost $28,000 in savings by investing in Squid tokens, according to CNBC . Another case told CoinTelegraph that he spent "several hundred dollars", then the token increased in price by more than 45,000% but could not sell due to lack of liquidity, and could not withdraw the money he deposited.
Cryptocurrency remains a “Wild West” industry, with scams still rampant, including “rug pulls.” The ease and freedom of creating new tokens on blockchains and listing them on decentralized exchanges (DEXs) is a loophole that groups are looking to exploit, according to Kim Grauer, head of research at Chainalysis.
“Token creation and validation are unregulated, so scams of various sizes will continue to occur,” Grauer told CoinTelegraph . “New investors will be the prime targets, as they do not have much knowledge and experience in this field.”
Eva Crouwel, head of financial crime at cryptocurrency exchange Luno, said users should be wary of projects that lack transparency, lack clear information about the development team, have sketchy websites, and lack white papers or detailed development roadmaps.
"Start by doing as much due diligence as possible. Look closely at the social media profiles of the development team, the company, the smart contract, and pay attention to the comments of previous participants on the feedback page. Also, check the reputation of each project team member in the crypto community before deciding to invest," Crouwel told CNBC in 2021. This expert also believes that users should not spend too much money and determine to lose it if an incident occurs.
