‘Squid Game’ crypto collapse pushes investors to cry scam

John Lee couldn’t consider his luck. The $1,000 funding he made in Squid, a brand new cryptocurrency challenge impressed by the dystopian Netflix drama “Squid Sport,” had skyrocketed in value.

However inside 5 minutes Monday, his cash disappeared.

“I watched Squid fall down in a matter of minutes,” Lee, 30, from Manila within the Philippines, instructed NBC Information. “There was no manner to withdraw my funds intact.”

He was one among many investors who have been caught in what has turn out to be one of the vital high-profile cryptocurrency collapses of the yr — and one which some business specialists are warning is indicative of a market that’s ripe with scams.

The digital foreign money, referred to as Squid, was launched in late October and rapidly skyrocketed in value. It reached greater than $2,860 per token Monday morning earlier than dropping all its worth after the challenge’s unknown creators appeared to money out Squid tokens price greater than $3 million, in accordance to transaction particulars on a publicly accessible cryptocurrency digital wallet.

Since then, the challenge’s web site, SquidGame.money has vanished and its social media profiles have gone darkish. Many investors who spoke to NBC Information have accepted they’ll by no means see their cash once more. Some are calling it a scam.

“It was surprising however I do know that in crypto, there’s a big threat concerned, together with coping with scammers,” Lee stated. “It was a very good lesson.”

Archived variations of the cryptocurrency’s web site present that it had promised investors that they might be invited to be part of a digital recreation which was impressed by the favored Netflix collection, by which folks may win rewards.

However various clues on Squid’s web site instructed the challenge was not all that it appeared to be. The token’s white paper — a doc that outlines the challenge to investors — was riddled with spelling errors, and the web site made unfounded claims that it had partnered with Netflix and Microsoft.

Microsoft and Netflix declined to remark, although Netflix told CNBC it had no affiliation with the challenge.

On Friday, the technology website Gizmodo warned that the tokens have been a possible scam. That very same day, the crypto price-tracking web site CoinMarketCap warned potential investors to “train warning” after it had acquired reviews that customers weren’t in a position to promote their tokens.

CoinMarketCap then went on to warn that whereas the challenge was impressed by the Netflix collection, it “is unlikely to be affiliated with the official IP,” in a reference to mental property.

After the crash, greater than 40,000 folks nonetheless held Squid tokens, in accordance to information from BscScan, a blockchain search engine.

Craig Tinker, 49, of Philadelphia, invested $300 in Squid as a result of he stated he was falsely reassured by the publicity surrounding the challenge.

“It paints a really unhealthy image of crypto,” he stated. “It’s unhappy for all of the reliable initiatives on the market.”

NBC Information contacted the Squid token builders by contact data listed on its web site, however emails have been undeliverable and bounced again. 

Molly Zuckerman, CoinMarketCap’s head of content material, stated the token confirmed “all of the indicators of a traditional rug pull,” which is a time period within the cryptocurrency neighborhood for when creators abandon a challenge and steal investor cash.

“A darkish web site, silence throughout social media accounts, a public excuse to ‘step again’ for some purpose — all whereas the token’s liquidity and value is plummeting within the background,” she stated.

Zuckerman added that builders had additionally created an “uncommon ‘anti-dump’ mechanism” that prevented many investors from promoting their tokens. Investors may solely promote if the ratio of consumers to sellers was 2-1.

“I feel that many investors most likely weren’t conscious of this mechanism, and panicked once they have been unable to promote their tokens over the previous week, not realizing that was one thing written into SQUID’s white paper,” she stated. “Ethical of the story? All the time do your personal analysis and by no means put in additional than you’re prepared to lose, particularly with a memecoin vaguely associated to successful Netflix present.”

Cryptocurrency garnered a brand new wave of youthful mainstream investor curiosity in 2020 and early this yr as extra established cryptocurrencies reminiscent of Bitcoin and Ethereum, together with various cash like Dogecoin, soared in worth.

Nevertheless, greater than $80 million has been misplaced in crypto-related scams since October 2020, in accordance to a report this year by the Federal Trade Commission.

Steve H. Hanke, a professor of utilized economics on the Johns Hopkins College, believes the Squid token is yet one more instance that cryptocurrency is more and more a hotbed for criminals and fraudsters.

“You’ve gotten these issues within the crypto house nearly hourly,” he stated. “The cash simply vanishes and nothing occurs.”

“There’s an incredible quantity of systemic threat related to the so-called crypto ecosystem,” Hanke added, “and the rationale that the dangers are so large is that they’re working in a Wild West — no rules in any respect.”