Seems like the numerous cryptocurrency scams have not taught anyone a thing. Moreover, people are falling victim to increasingly more primitive schemes – the criminals don’t even need to invent anything. We decided to figure out what can be learned from the collapse of the Squid token launched in the wake of the Squid Game series’ success.
On October 20, the South Korean Netflix series Squid Game got its own cryptocurrency. Immediately following the release, it had a sensational take-off: according to CoinMarketCap, just in the first day, the cost of the token increased by 264.67%. The market cap of the Squid Game crypto quickly surpassed $ 372 million.
According to the asset creators’ official version, they launched an exclusive coin for the TV series-based game. The idea supposedly was that joining the rounds would require payment with a token or NFT. Then there would be a six-round online competition, similar to that in the show, only, of course, completely safe. Importantly, you couldn’t sell your crypto coins: the holder was required to collect 456 tokens to participate in the game and only got a chance to withdraw the prize after it was over.
Back on October 26, the token price on the PancakeSwap exchange was $ 0.012. But then the “newcomer” was discovered by journalists: on October 28&29, such large media as BBC, CNBC, and Business Insider reported on the new Squid token. The articles were even quite optimistic. “If you’re a fan wanting to express your devotion to the hit Korean Netflix show Squid Game – well, there’s a cryptocurrency for that”, – wrote, for example, the BBC. As a result, on October 29, the token price was already $ 11.6.
Still, even then, the insane growth rate (tens of thousands percent in less than a week) aroused suspicions of fraud among many observers. Experienced crypto specialists, having lived through 2017, did not react to Squid at all – they saw right through it. But over the past three years, hundreds of millions of novices have entered the crypto industry…
On October 30&31, the Squid token continued rising to around the $ 37 mark. On November 1, the price inexplicably soared 77 times at once and reached $ 2856.54. Then, just as abruptly, it plummeted to 5 cents in a matter of minutes, right in front of traders losing their minds.
Just before the drop, the number of coin-carrying wallets suddenly stopped growing. Initially, 10,000 – 12,000 wallets were created a day, but on November 1, this figure fell to just one thousand. Right at the moment when the money from users stopped flowing in and the costs continued climbing due to the accelerated value of the token, the creators decided to collapse the price. It likely means that most of the early buyers of the cryptocurrency were bots controlled by the coin founders, and their task was to manufacture the hype.
The whole scam became possible due to Squid using the liquidity pools and automated market making technology that became popular a couple of years ago. It allows each market participant to provide their own liquidity for trading, but also leaves an opening for fraudulent schemes.
Various estimates show buyers investing anywhere from $ 2.8 million to $ 11 million in Squid. The actual number is presumably on the lower side since a large number of purchases were clearly faked by the token creators. According to Gizmodo, the scammers managed to lure $ 3.38 million from investors, probably the most accurate number.
As we have already mentioned, more experienced crypto investors ignored the Squid token entirely – the project was covered in “red flags”. The website created two weeks before the coin launch was full of errors and strange formulations. The founders listed there did not have profiles on LinkedIn or Facebook. (It was later revealed that all the creators on the site were made-up characters.) The project’s Twitter and Telegram accounts did not allow comments. Unsurprisingly, the web page and other related social networks ceased to exist right after the collapse.
But there were also multiple media outlets directly warning of the potential scam. Netflix said it had nothing to do with the cryptocurrency and did not endorse it. ScamAdviser, a fraud-checking resource, found the token’s site suspicious and gave it a low trust rating of 45 out of 100. CNBC mentioned numerous issues and tried to contact people listed on the token’s site. Failing to do so, they reported on it as well.
CoinMarketCap even issued a warning: “We received numerous reports that the Squid website and social networks are no longer functioning, users cannot sell a token on PancakeSwap. Please apply due diligence and be careful.”
This is not to say that it was all in vain: a large-scale scam only brought its creators a relatively small amount by the standards of the cryptoindustry. The architects of such well-known schemes usually collect hundreds of millions, if not billions of dollars, before “riding off into the sunset”. In this case, it was “just” $ 3.38 million …
What is notable is rather the very phenomenon of meme-cryptocurrency. We will definitely discuss it in the upcoming articles.
Less than two days after the Squid token was exposed, we saw its analog – BABY SQUID – being actively promoted on social networks. Outwardly, everything is very similar; only the name was changed slightly. The new project already has tens of thousands of subscribers on Twitter and Telegram.