The Chinese police cracks down on a multi-million dollar DeFi rug pull and ended up arresting eight people from different provinces and froze their assets worth millions as we can see today in our crypto news.
Beijing’s crackdown on crypto continued as the new year started with the Chinese police crack down of 6 million yuan worth of crypto and arresting eight people that were involved with it. According to the report published by Nikkei Asia, the public security bureau of Chizhou reported a crypto rug pull scam that was worth about $7.8 million and the police started an investigation after one investor lost 590,000 yuan worth of crypto last year. The trail of the investigation led to eight people living in different provinces. The police were able to seize luxury cars, houses, and other expensive items from the accused that were purchased using the stolen funds.
The decentralized finance scam lured investors with promises of high returns and swapping liquidity. After investors put their money in, the scammer laundered the money from anonymous pools and stole all funds, as the police report said:
“After the investigation and analysis by the police task force, it was found that this case was a typical case of illegally obtaining virtual currency by using blockchain technology.”
Rug Pulls became one of the most common scams in the DEFI place because they are easier to pull off. According to Chainalysis data, the investors lost over $2.8 billion in rug pulls last year. These types of scams often offer investors bigger returns and once the pool got enough capital, the scammers run away with the money. Chainalysis reports show that rug pulls emerged as the go-to scam of the DEFI ecosystem that accounted for 37% of the crypto scam revenue in 2021 compared to the 1% in 2020.
While the crypto use for criminal activities is estimated to be around 1% of the supply, the growing scams in the DEFI space affected investors’ confidence quite a lot. However, it is also important to note that these scams often prey on vulnerable users rather than those who inherently interact with the crypto technology. The data from the top 15 biggest rug-pulls makes it evident that most of the scams happened with the new tokens promising higher returns.
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