Warning in the Surge of the Virtual Money Market: Rug Pull Incidents on Trading Platforms Raise Follow

Recently, the prices of mainstream virtual money like Bitcoin and Ethereum have surged significantly, sparking investors’ expectations for a “crypto asset spring” and a “super bull market.” However, behind the opportunities often lurk risks. On February 23, 2024, a cryptocurrency exchange claiming to be headquartered in Hong Kong vanished at an astonishing speed after withdrawing 57 million dollars from its online wallet, becoming the first “Rug Pull” case in the Hong Kong crypto asset circle in 2024.

Scam Tactics of Trading Platforms

This exchange is actually a rebranding of the previous “Coin Husband Network”. As early as 2019, the platform artificially inflated its liquidity data through frequent multi-account buying and selling, cross-platform trading, and capital circulation. According to a report from a third-party crime research organization, the platform’s real trading volume is only about one-eighth of its publicly disclosed data.

Despite its fraudulent activities being exposed, the platform was still able to attract retail investors by launching various small coins and engaging in wash trading due to the lack of effective regulation. Two days before the rug pull, the platform’s trading data experienced a cliff-like drop, which was a clear warning sign. Ultimately, the platform closed its website after withdrawing large amounts of funds, and the customer service personnel also disappeared.

Investor Precautionary Advice

1. Carefully choose a trading platform: avoid using small exchanges with low recognition and questionable reputation.

2. Make good use of third-party data tools: Utilizing professional on-chain data monitoring and analysis tools, such as Dune Analytics, can help investors identify abnormal behaviors on the platform.

3. Follow platform personnel changes: Significant personnel changes may indicate changes in the platform’s business strategy or potential risks.

4. Maintain a rational investment mindset: Do not be deceived by short-term high returns, and carefully assess investment risks.

Cross-Border Rights Protection Measures

For cryptocurrency fraud cases involving Hong Kong, mainland victims can take the following steps:

1. Report to the Hong Kong police or relevant authorities, providing detailed account information.

2. If necessary, a lawyer may be authorized to apply to the Hong Kong court for an emergency injunction.

3. Consider filing a civil lawsuit for reasons such as fraud, unjust enrichment, or legal constructive trust.

4. Obtain necessary evidence through legal means, such as applying for a disclosure order to obtain relevant account information.

It is important to note that the judicial authorities in Hong Kong, when handling such cases, have the primary responsibility of ascertaining the facts of the crime and rendering a verdict, rather than directly recovering the victim’s losses. Therefore, victims often need to initiate separate civil proceedings to recover their losses.

Conclusion

When participating in investments in the virtual money market, it is essential to maintain a cautious attitude. Choose a reputable trading platform, be attentive to identifying potential risk signals, and always follow market dynamics. Investment in offshore trading platforms requires extra caution; remember not to overlook potential risks for short-term gains. In the event of losses, it is also extremely important to take legal measures promptly to protect your rights.