Rug Pulls: How to Spot a Usual Suspect

Rug Pulls: How to Spot a Usual Suspect
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Join us as we examine Rug Pulls in the NFT Space with Daz3D

In part four of our RugRats series, we’re looking at How to Spot a Usual Suspect in potential rug pulls. We’ll consider what history has taught us, common tricks ruggers use, and the role influencers can play in both driving FOMO and helping you stay up-to-date on the latest in scams and security.


What do we mean by Usual Suspect?

A Usual Suspect refers to a team or person whose actions suggest they will take advantage of investors in an orchestrated rug pull. Before they abandon a project and take the invested money without fulfilling their promises, they say and do things that are suspicious.

Each rug pull is different, but one advantage that today’s NFT investors over previous generations is data. They say that history is the greatest predictor of future behavior. So let’s look at common tricks of well-known rug pulls.

How to spot a Usual Suspect: history repeats itself

All hype, no substance

Blockverse is a perfect example of all hype, no substance. They exhibited common characteristics to other rug pulls like:

  • Quick growth.
  • Unrealistic roadmap: integration with the Minecraft game universe.
  • Life-changing, “get rich quick promises: token earning  ($DIAMONDS) based on time logged.

This last promise is a big red flag. When Blockverse launched in January 2022, many projects were using the promise of token earnings as a tactic. That was until risks of potential SEC intervention were identified.

Turns out promising earnings, even through tokens, turn digital assets into securities. 

Blockverse was a rug pull

No dox, no dollars

Want a great practice for when you’re considering investing in an NFT project? Pretend you’re an angel or startup investor.

Investors in early-stage companies (which all NFT projects are) focus on the team in most investment decisions. Are they first-time founders? Where have they worked? What are their accomplishments to date?

When a team isn’t doxxed (no public identifying information) this due diligence isn’t possible. The reason is that it makes disappearing without a trace easier.

In 99 cases out of 100, undoxxed teams feature prominently in all historical rug pulls. Of course, there are exceptions to this rule, as the fraud case at FTX has shown.

Influencers can be influenced

Are there values-based, trustworthy, influencers in Web3? Yes. Are there influencers using their platform to mislead potential investors? Yes.

So, a rule of thumb is to remember: third-party endorsement does not equal third-party validation.

If you take an influencer’s word on the potential of a project, you’re assuming that:

  • They’ve done their research.
  • They share an investment thesis aligned with yours.
  • They aren’t influenced by the exchange of money for promotion.

One famous example of this is the Animoon project. This project was heavily promoted by influencer Jake Paul, and promised a play-to-earn game and big partnerships, like Pokémon.

A breakdown of the Animoon rug pull

Your investment decisions deserve your due diligence. Anything less than this means you’re outsourcing the number one priority of any investment process: research.

You worked hard for your money, don’t leave its future in the hands of anyone but a verified and trusted professional.

How to spot a Usual Suspect: your checklist

You’re now aware of some of the classic indicators of a rug pull. The next task is to arm yourself with this How to Spot a Usual Suspect Checklist. It’s an expanded version of the one you’ll find in the first article in the RugRats series.

  1. Team: Remember, research the team like you’re an angel investor/early-stage start-up. Who are they? What experience do they have that indicates they can execute against their promises? If there is no public identifying information, proceed with caution.
  2. Social Channels: Is there a large difference in their numbers on Twitter and in Discord? How long have they been active on these channels? Growing an organic following on social media is extremely difficult and takes time. Do the numbers align with their time spent in web3?
  3. Website: Don’t underestimate the power of a talented UpWork or Fiverr professional. Many designers can make a beautiful website. Fewer can produce mature copy, sentence structure and grammar. The same can be said for the website’s speed. If they can’t put together a flawless website, how are they going to build a P2E game in the next 3 months as promised?
  4. Data: Data rarely lies. Analyze the trading history of a project using DappRadar´s NFT Explorer. This tool provides data and metrics (including sales activity) with corresponding wallet IDs.
  5. Slow Down: If you’re feeling FOMO, chances are the opportunity is already gone. Usual suspects take advantage of the very human, emotional, reaction to missing out. It’s innate and can easily cloud our judgment. Slow down, and take a breath. If you have great conviction about a project, immediate entrance isn’t necessary.

People to follow to stay informed

Now you’ve got the foundations of How To Spot a Usual Suspect. Moving forward, it’s your responsibility to stay up to date on the market to continue to keep your funds safe.

We’re seeing new scams pop up in Web3 and NFTs on a daily basis. Our knowledge of scammers develops, but so do their skills and techniques.

Keep Twitter notifications on the below people to stay up to date on the latest usual suspects:

@zachxbt: turned his rug pull experience into a passion for meticulous detective work. He now shares and educates the community on scams and the people behind them.

@SimonartOnline: painter and digital artist with 16 years of experience in Cybersecurity. Simona advocates for digital security and educates the community in a way that’s accessible.

Simonart’s NFT is available on secondary marketplaces

@NFTherder: OKHotshot is an expert in on-chain analysis, audits, and discord security. His “matter-of-fact” and direct approach is refreshing and he’s worked with some of the most renowned projects in NFTs, i.e. Loserclub, AlienFrens, etc.

Read OKHotshot’s interview with DappRadar

This is the fourth 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.

Carry your Web3 journey with you

With the DappRadar mobile app, never miss out on Web3 again. See the performance of the most popular dapps, and keep an eye on the NFTs in your portfolio. Your DappRadar account syncs with our mobile app, giving you soon the option to receive alerts live as they happen.

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