Abstract
DeFi has attracted legitimate investors and scammers alike. The paper presents an empirical investigation into the prevalence of rugpulls, a scam where cryptocurrency project developers exit without fully delivering and leave investors in the wind. Using forum data, 101 rugpulls from 6 different types of DeFi services are documented. ICOs form the majority of the rugpulls, most of which were active for less than six months before scamming out. ICOs rugpulled in 2021 were active for a much longer time than those that were rugpulled later on, perhaps pointing to new entrants intending to pull the rug. Through qualitative thematic analysis, we discover that these schemes primarily use authoritative and financial lures at the announcement stage of the project to mimic legitimate projects.
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Notes
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We only consider those that we have start dates for. See Sect. 3.1.
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Marketing must also follow the notification and publication process where applicable.
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The right to withdraw and reimbursement only applies to retail holders and not to qualified investors.
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Acknowledgements
We would like to thank the reviewers for their helpful comments and the FC attendees for their insightful questions. MO is supported by the UK Engineering and Physical Sciences Research Council [grant number EP/S022503/1]. GAS and AH are supported by the European Research Council (ERC) under the European Union’s Horizon 2020 research and innovation programme [grant agreement No. 949127].
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Agarwal, S., Atondo-Siu, G., Ordekian, M., Hutchings, A., Mariconti, E., Vasek, M. (2024). Short Paper: DeFi Deception—Uncovering the Prevalence of Rugpulls in Cryptocurrency Projects. In: Baldimtsi, F., Cachin, C. (eds) Financial Cryptography and Data Security. FC 2023. Lecture Notes in Computer Science, vol 13950. Springer, Cham. https://doi.org/10.1007/978-3-031-47754-6_21
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