In a newly published report, Hacken, the prominent blockchain security auditor, sheds light on the telltale signs of cryptocurrency rug pulls that are remarkably conspicuous to investors. This groundbreaking security insights report, released on October 25, delves into the trends surrounding crypto hacks in Q3 and evaluates the security measures adopted by the affected projects.
The focal point of this report is the insidious world of rug pulls, a nefarious exit scam in which a project’s team artificially inflates the token’s value before executing a sudden and devastating liquidity withdrawal. Astonishingly, Hacken reveals that rug pulls constituted the lion’s share of crypto exploits in Q3 2023, contributing to more than 65% of all cryptocurrency hacks during that period.
The ubiquity of rug pulls can be attributed to their relative ease of execution. Serial scammers have been employing token factories that exhibit consistent behaviors to churn out fraudulent tokens on a massive scale, a detail noted in the report.
However, despite their prevalence, Hacken emphasizes that combating cryptocurrency rug pulls is surprisingly straightforward. The report offers valuable insights into identifying and preventing such scams based on their observations in Q3.
One of the most crucial steps in assessing a crypto project’s legitimacy is to verify the existence of an independent third-party audit, according to Hacken’s findings. Shockingly, of the 78 Q3 rug pulls scrutinized, only 12 had reported completing any form of audit.
Furthermore, Hacken warns that even when a project claims to have undergone an audit, users should exercise caution. The mere presence of an audit does not guarantee immunity from scams, as Hacken points out, “The project can undergo an audit and have an audit report but with a poor score. Yet, users overlook this and consider the mere fact that the project was audited as sufficient.”
Dyma Budorin, co-founder and CEO of Hacken, sheds light on the investor mindset, emphasizing that many individuals ignore red flags like the absence of audits and other critical issues due to the ever-present fear of missing out (FOMO). The crypto industry has witnessed remarkable success stories with meme coins like Pepe (PEPEUSD) and Shiba Inu (SHIBUSD), where a mere $100 investment out of curiosity led to substantial profits, fueling the hopes of history repeating itself.
Budorin notes, “This desire for substantial returns in a short timeframe often causes individuals to overlook red flags and impulsively dive into investments.”
Scammers, being well-versed in human psychology, frequently draw parallels to successful projects, intensifying the FOMO surrounding the next big opportunity.
Hacken’s CEO also underscores the ease of investing in cryptocurrency, describing it as a “no-brainer” for many users, requiring only a few clicks. This simplicity, while convenient, can also lead to hasty and impulsive decision-making, further highlighting the need for vigilance in the crypto space.