John Lee couldn’t imagine his luck. The $1,000 funding he made in Squid, a brand new cryptocurrency mission impressed by the dystopian Netflix drama “Squid Recreation,” had skyrocketed in value.
However inside 5 minutes Monday, his cash disappeared.
“I watched Squid fall down in a matter of minutes,” Lee, 30, from Manila within the Philippines, advised NBC Information. “There was no approach to withdraw my funds intact.”
He was one in every of many traders who have been caught in what has change into some of the high-profile cryptocurrency collapses of the 12 months — and one which some business consultants are warning is indicative of a market that’s ripe with scams.
The digital forex, referred to as Squid, was launched in late October and shortly skyrocketed in value. It reached greater than $2,860 per token Monday morning earlier than dropping all its worth after the mission’s unknown creators appeared to money out Squid tokens price greater than $3 million, in accordance with transaction particulars on a publicly accessible cryptocurrency digital wallet.
Since then, the mission’s web site, SquidGame.money has vanished and its social media profiles have gone darkish. Many traders who spoke to NBC Information have accepted they’ll by no means see their cash once more. Some are calling it a rip-off.
“It was surprising however I do know that in crypto, there’s a large danger concerned, together with coping with scammers,” Lee stated. “It was a great lesson.”
Archived variations of the cryptocurrency’s web site present that it had promised traders that they’d be invited to hitch a digital sport which was impressed by the favored Netflix sequence, during which folks may win rewards.
However quite a few clues on Squid’s web site advised the mission was not all that it seemed to be. The token’s white paper — a doc that outlines the mission to traders — was riddled with spelling errors, and the web site made unfounded claims that it had partnered with Netflix and Microsoft.
Microsoft and Netflix declined to remark, although Netflix told CNBC it had no affiliation with the mission.
On Friday, the technology website Gizmodo warned that the tokens have been a probable rip-off. That very same day, the crypto price-tracking web site CoinMarketCap warned potential investors to “train warning” after it had obtained stories that customers weren’t capable of promote their tokens.
CoinMarketCap then went on to warn that whereas the mission was impressed by the Netflix sequence, it “is unlikely to be affiliated with the official IP,” in a reference to mental property.
After the crash, greater than 40,000 folks nonetheless held Squid tokens, in accordance with information from BscScan, a blockchain search engine.
Craig Tinker, 49, of Philadelphia, invested $300 in Squid as a result of he stated he was falsely reassured by the publicity surrounding the mission.
“It paints a really dangerous image of crypto,” he stated. “It’s unhappy for all of the respectable tasks on the market.”
NBC Information contacted the Squid token builders by way of contact info listed on its web site, however emails have been undeliverable and bounced again.
Molly Zuckerman, CoinMarketCap’s head of content material, stated the token confirmed “all of the indicators of a traditional rug pull,” which is a time period within the cryptocurrency neighborhood for when creators abandon a mission and steal investor cash.
“A darkish web site, silence throughout social media accounts, a public excuse to ‘step again’ for some purpose — all whereas the token’s liquidity and value is plummeting within the background,” she stated.
Zuckerman added that builders had additionally created an “uncommon ‘anti-dump’ mechanism” that prevented many traders from promoting their tokens. Buyers may solely promote if the ratio of patrons to sellers was 2-1.
“I feel that many traders in all probability weren’t conscious of this mechanism, and panicked once they have been unable to promote their tokens over the previous week, not realizing that was one thing written into SQUID’s white paper,” she stated. “Ethical of the story? At all times do your personal analysis and by no means put in additional than you might be keen to lose, particularly with a memecoin vaguely associated to successful Netflix present.”
Cryptocurrency garnered a brand new wave of youthful mainstream investor curiosity in 2020 and early this 12 months as extra established cryptocurrencies equivalent to Bitcoin and Ethereum, together with different cash like Dogecoin, soared in worth.
Nonetheless, greater than $80 million has been misplaced in crypto-related scams since October 2020, in accordance with a report this year by the Federal Trade Commission.
Steve H. Hanke, a professor of utilized economics on the Johns Hopkins College, believes the Squid token is one more instance that cryptocurrency is more and more a hotbed for criminals and fraudsters.
“You’ve gotten these issues within the crypto house virtually hourly,” he stated. “The cash simply vanishes and nothing occurs.”
“There’s an amazing quantity of systemic danger related to the so-called crypto ecosystem,” Hanke added, “and the rationale that the dangers are so super is that they’re working in a Wild West — no rules in any respect.”
