Squid Coin is one of the most fraudulent memcoins

Some fraudsters manage to fool even extensive services, such as CoinMarketCap. This is precisely the situation with the Squid Coin token, which became one of the most sensational scams in 2021.

The backstory

The first season of the popular South Korean TV series Squid Game was released in 2021 and quickly became a favorite of millions of users around the world. So, it's no surprise that anything related to the series quickly attracted attention at the time.

In the same year, the crypto market experienced its second major bull run, which surpassed the crypto boom of 2017. In addition, the new Play-to-Earn or P2E model was gaining particular popularity in this market, which the creators of the infamous Squid Coin took advantage of.

In October 2021, CoinMarketCap (CMC), the most popular service for monitoring cryptocurrency rates and other metrics, published a page for a Squid Coin token using the original series' identity.

The thing is, the CMC team carefully evaluates projects before listing them and takes into account a lot of criteria, such as:

trading volumes;
trading pairs on crypto exchanges;
community involvement
team and age of the project;
innovativeness, and more.

Often, token pages appear on the CoinMarketCap website after their developers have listed them, at least on decentralized exchanges like Uniswap or PancakeSwap. Despite all this, the organizers of the Squid Coin project managed to "cheat the system" of CoinMarketCap and get their token listed on the service's website — that's when the fun began.

The rise of the Squid Token and the rag pool

The website was launched in October 2021, designed entirely in the style of the TV series The Squid Game. To attract users, Squid Coin developers promoted a Play-to-Earn model. Although there was no working prototype then, the project team assured users of their plans to release a game in which they could compete in teams and earn cryptocurrency. Of course, token holders were promised bonuses that would allow them to earn more.

Against the backdrop of the popularity of the Squid Game series, Squid Token instantly attracted attention. The excitement was so high that, at first, no one paid attention to the impossibility of selling tokens on decentralized exchanges (the SQUID token was never placed on any centralized crypto exchange). Users probably believed that the project was related to the original TV series, and the Squid Coin page on the CMC website exacerbated the situation. Investors even ignored the numerous grammatical errors in the text posted on the Squid Coin website.

The token was listed on the decentralized exchange PancakeSwap on the Binance Smart Chain network, and in just a few weeks after launch, the SQUID token exchange rate soared over 40,000%, reaching $2862 at its peak. However, soon, when investors decided to lock in profits and sell SQUID tokens, the first red flags began to appear: it turned out that the tokens could not be sold.

Interestingly, CoinMarketCap experts evaluate smart contracts for possible fraud and security breaches, among other things. When violations are often detected on an existing token page, the CMC team publishes an appropriate warning (which was later done with the Squid Coin project).

Blockchain experts later discovered that the SQUID token contracts had two unusual features:

The first one allowed Squid Coin creators to withdraw tokens from any liquidity pools;
The second was programmed so no one could sell tokens except the organizers.

When the token price peaked, its creators quickly sold all their tokens to SQUID and then immediately shut down their website and social networks, i.e., they made a rag pool (Rug-Pull literally means "pulling the rug out from under your feet"). As a result of the rag pool, the value of the SQUID token fell below one cent.

According to on-chain analysts, fraudsters earned more than $11 million from the Squid Coin token scam. While this is far from the largest scam in terms of the damage caused to investors, the case became egregious due to CMC's negligent verification.

After the scam, the Squid Coin creators converted their loot into the native cryptocurrency of the Binance Smart Chain BNB network and laundered the funds through the popular Tornado Cash mixer.

Although the fraudsters made several mistakes while attempting to launder the funds through TornadoCash, which eventually allowed them to track the movement of the stolen funds, they still failed to be identified and caught.