A New Type of Fraud Has Appeared In the Field of Decentralized Finance
A new type of scam called the “soft rug” has recently emerged in the DeFi decentralized financial ecosystem.
In the DeFi field, there is a term “rug pull”, which means abandoning a project by insiders or developers, removing liquidity from pools or storages on decentralized exchanges and then disappearing with funds.
A soft rug is when the project founders simply dump their own tokens and exit the enterprise instead of taking control of users’ assets.
In this scheme, developers go out of their way to gain trust and create a false sense of security by trying to disguise the token dump. If the scammers do everything seamlessly, users won’t even suspect anything until it’s too late.
For example, on June 20, the Polywhale team announced that they were discontinuing work on the platform. Two days later, the project’s treasury wallet was empty.
The founders of Polywhale Finance have been accused of pulling out the “soft rug” by selling their tokens during the latest cryptocurrency price crash.
Swipe was also involved in a similar scheme, writes Defiant. The developers have created the third-largest Binance Smart Chain protocol, Venus. And on June 22, the creators of the project announced that they were abandoning it. Uniswap community member @MonetSupply accused the team of a “soft rug” scam.
However, members of the Venus community have denied the allegations. They stated that these were just rumours. The Swipe team also donated all of their tokens.
Recently, the US Securities and Exchange Commission (SEC) accused Loci Inc. and its CEO John Wise of fraud and conducting an unregistered securities sale of LOCIcoin in 2017 and 2018.