Learn how communities can band together to “fight back” against NFT Rug Pulls
Our first article from this multi-part series on rug pulls explored what rug pulls are, how they work, how to identify the red flags in a potential rug pull, and how to distinguish a rug pull from project mismanagement.
In part 2 of this series, we will dive deeper into how communities can band together to “fight back” when faced with some of the unsavory pitfalls that tend to plague the NFT space.
- What We Mean by “Fighting Back”
- How to Fight Back: NFT Project Buyouts and Communities Taking Control
- How to Fight Back: Creating Entirely New Projects With Rugged Communities
- Steps For Fighting Back
What We Mean By “Fighting Back”
As we outlined last week, many NFT projects succumb to bad actors who carry out rug pulls and other scams.
For many projects, the “rug pull” or “scam” label is a death knell, whether warranted or not, liable to tank a project’s floor price. This is an unfortunate reality, given the hard-earned money that pours into NFTs under the hope of a strong financial return.
Thankfully, we now have several examples of NFT communities “fighting back” to appropriate their projects, as well as companies and investors with more management experience & capital injecting new life & direction.
Led by community leaders who don’t want to see their precious NFTs collect digital waste, the projects we’ve outlined below are invaluable case studies on how communities can continue to exist and thrive in the wake of negligence and malice.
How to Fight Back: NFT Project Buyouts and Communities Taking Control
The first and most common way we have seen a community take back a project is through buying the project’s assets from the original founders. Pudgy Penguins and Fame Lady Squad are examples of this tactic, in which upstanding NFT community members staked their belief in the projects by raising funds to buy them outright.
Pudgy Penguins: Outside investors to the rescue
Pudgy Penguins minted in July of 2021 to much acclaim and excitement, immediately landing on OpenSea’s rankings for the top project sales by volume.
Cole Thereum, the initial founder of the project, drove the hype by promising an array of awesome community initiatives. But after a couple of months of inaction, the community grew restless.
Pudgy Penguins whale 9x9x9 and other prominent community members eventually conducted a vote to remove Cole from the project while offers to buy the project began to trickle in. Ultimately, the original founders sold the project to Pudgy Penguins holder and Los Angeles-based entrepreneur Luca Netz for $2.5M.
Fame Lady Squad: A community takes over
Fame Lady Squad made headlines when it launched in the summer of 2021 by claiming to be one of the first women-led projects in a space dominated by men. It also happened to be the first large-scale, all-female generative PFP NFT collection at a time when there was very little diversity showcased in avatar projects which were booming in popularity.
The founders were fraudsters
In a twist ripped from a screwball comedy, it was later uncovered by the community that the founders were actually men. At first, the founders tried negotiating with the community to regain their trust. After the accusations, the founders came clean and admitted to their fraud.
The community took over the project
The exposed men claimed they would donate to women-oriented causes and establish a grant program to support new women-led NFT projects. But the community was unforgiving of their dishonest actions and voted for the founders to transfer project control.
The smart contract for the collection was passed along to @digitalartchick as a temporary custodian after she publicly demanded the founders give up their rights as project owners.
The same day, after community calls to action, were made clear, she transferred this ownership to @iamboredbecky. Bored Becky and other female leaders from the Fame Lady Squad community now run the project.
Daz3D steps in
Most recently, Daz3D (CloneX, RTFKT, Batcowls, CocaCola, Champion) stepped in to fund the female leaders and develop the Fame Lady Squad, which is quietly being rebuilt with a planned relaunch in the coming months.
The Fame Lady Squad story is a landmark of NFT community empowerment through fighting back, the project going from being founded by men pretending to be women to being owned by upstanding female NFT community members.
Fight Back Apes : Creating a new project from the ashes
Evolved Apes was one of the earliest and most public rug pulls in NFT history, and the first to be extensively covered by the mainstream press. After the founders disappeared with $2.7M, leaders from the Evolved Apes community decided to ‘Fight Back.’
They partnered with leading 3D-content company Daz3D (CloneX, RTFKT, Batcowls, CocaCola, Champion, and the soon-to-launch Game of Thrones) to fund the development of a comprehensive comeback collection, aptly dubbed ‘Fight Back Apes’.
Fight Back Apes represents a vast community of people, including those affected by the Evolved Apes rug pull and those affected by other rugs and scams across the Web3 space.
The ethos of the community is to provide educational community initiatives to identify possible rug pulls, vet project teams, and avoid the collective mistakes many people in the NFT space have made.
How to Fight Back: Creating Entirely New Projects With Rugged Communities
Fighting back may be more challenging than buying back the project from the founders. Often, founders who conduct rug pulls vanish without a trace and without suffering from legal ramifications, making the prospect of tracking them down, let alone buying the project back, impossible.
In other cases, a community may not have the funds to buy back its project, even if the option is on the table.
Luckily, NFT communities exist on public blockchains. A “rugged” community can seamlessly fork by identifying its holders and creating a course of action to bridge those holders into a new collection and community.
Steps For Fighting Back
1. Identify project founder and management team
As we have seen with Pudgy Penguins and Fame Lady Squad in the examples above, identifying and communicating with the original founders is key. If the founders are un-doxxed, hire investigative firms and on-chain sleuths (CipherBlade is an example of this) to uncover their identities.
2. Identify leaders who naturally stand out from the community
Natural leaders establish themselves in every community, Web3 and otherwise. Identifying people who have a passion for seeing the project succeed is important. Support these leaders in their quest.
3. Rally up the community
Use your social media networks to your advantage. Create your own private group chats to coordinate communications in private forums. Share your concerns with close friends and other members of the community.
4. Present alternative plans for the project
Gather sentiment from other community members. Do you have a plan for the treasury money? Do you want to see a new founding team take over? Planning with others keeps your message clear.
5. Put a full-court press on the founding team
Threaten legal action immediately. Put pressure on the founders. File a report to your local or federal government authority where you reside. Report collections on OpenSea and social media.
6. Start your own community with other project members
If buying the project outright isn’t an option, fork the community by launching a new collection. This can be done in tandem with taking steps to bring justice to the founders of the original collection.
7. Educate others not to make the same mistake
This might be hard to do, but in many cases, the best thing you can do is to keep moving forward in the space. Many people have been there. NFTs are still a new technology with a steep learning curve.
8. Keep your head up and keep trudging forward
Being early to new technology is risky in and of itself. Educate yourself and others using advanced data tools like DappRadar to aid your research.
Keep learning about NFTs with DappRadar
Investors must always do their own research and educate themselves properly about the market. For anyone looking to dip their toes in the world of NFTs, the more you know the better.
The space evolves fast but you can always keep up with the latest trends and new concepts by learning with DappRadar.
DappRadar´s NFT tools can help your investigation by diving into popular NFT collections, marketplace rankings, and top real-time sales.
This is the second installment of a multi-part series examining the nature of NFT rug pulls. The series is supported by Fight Back Apes, a collection of hyper-realistic 3D apes with a retro-futuristic aesthetics spawned by holders leftover from the Evolved Apes rug pull. Follow our series to learn more about doing your own research and NFT safety