Various Scam/Rug Pull Methods Performed By Token Developers Through AMM

[masulum]

Automated Market Maker (AMM) is a decentralized exchange (DEX) like Uniswap, Pancake, Quickswap and more, which is currently very often used to exchange new tokens or what is known as an early project. There are lots of methods used by developers to attract new token hunters (APE) so they interested to buy the tokens, when tokens launched. This thread is a thread from the compilation of cases that I found and I have discussed in my local board thread. Because, I think beginners need to know this, so I decided to make a special thread for beginners on the global board. Perhaps, the existence of this thread can help prevent traders from being more careful in entering new tokens.

1. Minting Token
The first thing developers do is mint tokens to sell when prices are high. This condition will certainly be very detrimental to traders. The reason is, when the token price is high enough, the developer mints the token and sells it in large quantities, coz of these a price dump occurs and causes traders lose big amount. Mostly, after the dev mints the token, they run away or the project becomes a scam.

2. Tokens cannot be sold
The second method is the developer does not give permission to the holder to sell the tokens they own. Generally, if you have this token you will get a notification, FAILED or something similar when you confirm the sale.

3. LP Burn then dump
Some of you may think that if the LP has been burned (sent to the burn address) then the project will be safe. But, no it's not. When the LP burn, the dev still has a lot of tokens which the reason is for development allocation, this allocations used for price dumps. So, they sell this allocation in its entirety in one transaction and then drain the burnt LP. Thus, the holder cannot resell tokens because there is no longer available Liquidity.

4. Fake LP Locked
Fake LP locked are developers say if LP they created has been locked for a very long time. However, on closer inspection, these locked LPs are only worth a measly $1-100, whereas for LPs with large values ​​or more than $1000, they only lock in a few hours. When the trader thinks it's safe, and the LP with a large value is unlocked, dev can freely withdraw the LP and the coins become unsellable.

Thats several case i found when I played on early tokens, of course some of case isn't new case, but i believe if beginner doesn't know about this before. The best way always re-check their dev team behind, if you still want to play on new tokens, DWYOR because you can lose everything from new project.

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[Davidvictorson]

Here's a question @masulum. When these scams are uncovered and reported does the U.S Securities and Exchange Commission (SEC) stepped in to shut it down?

The importance of doing one's homework before investing in an token cannot be overemphasized. Personally, I check LinkedIn or other social media outlets to gather more information about each individual team members of a project. It's not uncommon for scammers to invent fake founders and biographies for their projects on their websites.

Another thing I do is to thoroughly read the ICO whitepaper because it reveals alot about any project. I always ask myself, "Is this project achievable? Are it's aims really feasible?"

[masulum]

I'm not so sure, looks like the SEC can stopped new born tokens, like Meme token projects. on average this project is a project developed by the Anon team, meaning that many of trader are consciously taking risks by buying the new token because many of them think that buying a new token is much more profitable. Reporting to the SEC will not stop the scammers, whether in crypto or in fiat investments with any new ways, that why we must more careful.

If you choose to do some research before buying a new tokens such as, ICO, IEO, IDO, IFO or whatever it is called, this is certainly very good and you are  on the right track. because with research you can minimize the loss of a lot of money. Sure, investing in Bitcoin is much better, but hype is unavoidable, that's why I'm sharing what I discovered from various scam methods via AMM.