The biggest crypto exchange in the world has launched an investigation into the Squid token in an attempt to recover its users’ lost funds and turn over its findings to law enforcement. Squid gained over 70,000% last week and reached $2,861, then lost 99% of its value on Monday.
As liquidity died, token owners found no way to sell. The play to earn token is not officially affiliated with the Squid Game series on Netflix, Barrons reported.
Pump and dump?
By the looks of it, Squid token was a pump-and-dump scheme, according to Binance. The exchange has frozen and blacklisted wallet addresses associated with the developers of SQUID, who have gone AWOL. Allegedly, they used Tornado Cash to cover their tracks. Currently, the exchange’s security team is trying to trace the funds.
Developers walked away with $3M
Token developers have walked away with at least $3 million according to Gizmodo. They have remained anonymous, and the token’s origins aren’t clear either. The token site and Twitter account are inactive. The developers posted on Telegram on Monday:
Squid Game Dev does not want to continue running the project as we are depressed from the scammers and are overwhelmed with stress. Sorry again for any inconvenience been made for you.
Anyone can launch a token on a DEX
SQUID traded mainly on PancakeSwap, an AMM (automated market maker). This means it’s basically a collection of smart contracts that set trade prices and terms without human intervention. The user community provides liquidity. It also helps govern the system.
For better or for worse, anyone can launch a token on a DEX. As the system is open source, it is permissionless, without any listing requirements or oversight.
Theft is a growing issue in DeFi
Theft is becoming more and more of a problem on DeFi platforms. In the first seven months of this year alone, crypto investors lost more than $680 million to theft, hacks, and other malicious activity according to CipherTrace, a blockchain analytics company. More than three-quarters of this total occurred on DeFi exchanges. In July, pump and dump schemes set investors $113 million back.
No customer support
The decentralized structure of DEXs like PancakeSwap, which runs on Binance Smart Chain, leaves investors with no recourse if something goes wrong. The PancakeSwap site says as much, warning that there is no customer support and advising users to reach out to the community through Telegram for help.
The end of Squid?
Squid was still trading on PancakeSwap yesterday according to CoinMarketCap. It has spawned SquidDao, Squidanomics, and Baby Squid Game. Traders are not deterred by the crash of the Squid Game token. The TVL of DeFi networks rose 2.6% over the last 24 hours to $253 billion. PancakeSwap’s TVL grew by 12% over the past week, currently amounting to $6.2 billion.
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