Online crypto scams: Vigilantes help root out online frauds

He added: "This is attracting large amounts of capital to projects that are not always robust or well-tested. Criminal actors have seen the opportunity to exploit this."

The rise and crash of cryptos like the 'squid coin', has made it amply clear that fear of missing out -- or FOMO -- prompts a lot of investors to forgo due diligence and proper research before investing. This is the "rug pull" scammers rely on. 

A rug pull scam is a pump-and-dump scheme in which a developer/scammer lists a coin on an exchange and convinces investors to provide liquidity through aggressive marketing. Then they drain the liquidity pool of the coin, effectively pulling the rug from under the feet of the investors and leaving them with nothing. This tactic can be easy to deploy as it is not hard to mint digital coins online. However, a vigilante group that calls itself RugSeekers has taken over the task of spotting these scams, per a Bloomberg article. 

The RugSeekers examine the source code of scam coins, price charts, and wallets for red flags. They examine the social media presence of the scam coin using channels like Telegram (messaging app). If they find any indications of foul play, they spread the word about the scam coin on social media.

The group has reportedly investigated a crypto called 'we save the moon'. After thoroughly going through the coin's telegram group and talking with the developers, questioning their methodology, the group concluded that the coin was a scam. They posted a warning on their Twitter handle about the coin, but to their dismay, the warning did not get the traction they were hoping for.

However, much still remains to be done to check such scams. As US Securities and Exchange Commission Chairman Gary Gensler had pointed out in a speech in August, "Right now, we just don't have enough investor protection in crypto. Frankly, at this time, it's more like the Wild West."