#004 — Scams, Rug-pulls and Slanders
Two things deter clouters from investing: the lack of active users and the fear of rug-pullers. The arrival of NFTs has not yet caused an increase in the number of active users which still stagnates at less than 4,000 per day.
The majority of clouters have suffered at least once the unpleasant experience of rug-pulling, and it certainly cooled them off to invest again in a promising creator.
What is a rug-pull? It is when you buy a creator’s coin and the creator sells all of his shares overnight, wiping out your investment.
We have reviewed the operating modes of scammers, the ways to recognize them and the solutions to avoid falling into their traps.
HOW DO SCAMMERS WORK?
Most small scammers create an account pretending to be a celebrity, or at least someone who has a significant number of followers on other social networks like Instagram. Many people get fooled into thinking they are getting a good deal by buying the coin at a low price. It is easy to verify if the clouter is really who he claims to be. Usually, he will link to “his” website, Linktree or other social network. If when you visit their pages, we do not find any Bitclout link, it is very likely that it is a fake. If you want to make sure, you can tell them that you would happily invest in their coin if they put their Bitclout link on their Instagram account, for example. Until they do, don’t invest.
Now we are more suspicious but a few months ago we easily trusted.
@UndervaluedCoins: Last April I ran into a creator claiming to be a developer of a popular online game with around 200,000 players. He had just created his account and his coin price was very low. I invested $ 100. Three days later he sold his shares and changed his username, and my $ 100 turned into $ 0.1!
Some scammers promise a guarantee against scams!
This is the case of this scammer account whose slogan is “your guarantee of security”.
To attract investors, they promise, “We only invest in people you trust. If they turn out to be a scam, then we will reimburse you for any losses you incurred.”
Unfortunately for gullible investors, this account sold all of its shares on July 21, dropping the value of its coin from $ 59 to $ 4.
But there are also more sophisticated scammers who manage to hack a verified Twitter account, for example, and therefore can put their Bitclout link in their Twiter profile. Fortunately, these cases are much rarer. On the other hand, they can be very dangerous!
@MarioNawfal explained he lost $ 70,000 in a single day with this kind of “verified” scammer.
He warns people about that scam in this video.
To make the scam more credible, some scammers send shares of their coin to well known people so that those people who appear in the list of holders of the scam-coin. People think if these famous people own shares of that coin, it’s probably a good deal; and they invest. 24 hours later, the scammers are gone.
@SAMF has exposed another very elaborate scam in which scammers robbed their investors of over $ 400,000! Their account named @charcoin has since been deleted. They had built a sophisticated ploy last May with website and whitepaper. To give investors confidence, they had distributed over $ 30,000 to the “winners” for a week, and then made a record rug-pull when their capitalization reached $ 650,000.
RUG-PULLS WITHOUT MALICE
There are also rug-pulls that are made by people who are not scammers and who may have different reasons for wanting to sell their shares.
In a very successful memo last June, @Sandirose (who has a background in financial fraud investigation) listed some good reasons why a creator might sell his shares:
- They have made a profit on their investment and believe now is a good time to sell.
- They need cash to participate in other projects or invest in other creators.
- They need the money. Remember that behind most accounts there is someone with real world issues and you never know what these people are going through in their life.
- They no longer believe in the creator or the project in which they had invested.
- They were disappointed with Bitclout and decided to leave.
Raj Lahoti is an atypical example of a creator known for his “raj-pulls” from the month of May and who is not considered a scammer. On the contrary. Many people consider him to be one of the most creative geniuses on the platform.
Raj created a strategy of selling all of his shares, thus dropping the price of his coin to a few dollars, which attracted new buyers for whom buying even with a very high FR was still a good deal.
And this is how Raj could make a profit. This strategy was named the FR game. [*FR: Founder Reward]
@RajLahoti: The point of the game was that the FR didn’t benefit the traders, but rather the hodlers because they couldn’t make any money until I rebought my coins. So it was a game of trust.
To the question: Have you benefited financially from this game? He replied, Unfortunately, no. On the other hand, I gave away 20 million diamonds in seven days and so I won the game of who gives the most!
Raj had a promotion: “Give me 5 diamonds and I’ll give you 6!” And I know he kept his promise because friends of mine did receive the 6 diamonds.
One thing is certain, it is that Raj won the game of notoriety!
The people who lost money are the ones who panicked and sold at a loss. But few hold a grudge against this charismatic clouter who loves to break the rules and do things unconventionally.
WHAT SOLUTIONS TO AVOID GETTING SCAMED?
The fact that the core team changed the default FR to 100% was certainly a good move in preventing scammers from investing in coins as soon as an account was opened even before the coin creator.
What can we do on our side?
1. As we saw above, the first thing to do is to check if the suspicious creators put their Bitclout link on their Instagram, Twitter or Youtube profiles.
2. Browse their posts and see how long they’ve been on Bitclout. Usually, a scam account will be recent and will have many posts within two or three hours.
Advice from @100: If I like their content, I follow them and watch a bit, then a day or two after that I invest. Sometimes I send them a DM just to have a general conversation. Not foolproof; some scammers are really, really good, and if you get ripped off like that, it’s not your fault.
3. Wait for a week before investing and start with a small amount
@maz: I’ve had DMs with scammers who seemed honest about their artwork, but who rug-pulled a day or two later. Now I’m waiting a week or two before I invest, and I only start with small amounts.
4. Check where the funding for a new account is coming from.
@brootle: I use @signalclout to see where the initial funding for new accounts is coming from. There are now many Russian scammers who create a new account for 1 day, withdraw all funds and start a new one.
5. If the new accounts couldn’t sell during the first few days.
@maz: Perhaps new accounts should not be able to receive investments for a certain length of time. This would force them to post content and participate rather than making a quick buck. Most scammers don’t. not the patience to invest their time.
6. Invest in creators under $ 150
@futurepolitician: The reason I like to support Creators who are under $150 is because if I lose money off a scam 3/10 times, I will still make money in the long term as long as I hold and let the other Creators start to develop more content/make more genuine connections. So buy and hold people!
@tshirttimemachine: Good strategy. I feel every consistent creators is worth $300 coin at some point. That would prove your theory correct.
7. Invest small amounts
@futurepolitician: I have made more on $5 investments then I have made on $50 just because the creators was brand new compared to someone who is more established. Money is made where risks are taken!
8. A rug-pull insurance project
@darian_parrish: The project is still in the works but not active. It is very similar to other insurance models. Get an anchor investor (@ARTZ previously volunteered) then collect premiums and use them to fund claims(scam losses) of policy holders (or in this case coin holders).
The project is on pause until DAU growth returns and more demand for the insurance.
VIGILANTES AND SLANDERS
Faced with this upsurge in scams, we have seen the proliferation of dedicated accounts to denounce scammers. If we can be delighted with these initiatives, the other side of the coin is that unfortunately, some vigilantes do not make a serious investigation and slander creators based only on presumptions, without even taking the time to contact the creators.
@PhilippeMeunier was the victim of this kind of slander.
Last month I saw that one of my accounts was tagged in a post. The post was a list of 23 alleged scammers. The person who posted that list was asking people to reclout the post and block the accounts mentioned on the list. I contacted this person to ask for an explanation. He replied that my account was suspected of being linked to a scam because I had received clouts from scammers. I explained that 2–3 months ago I bought clouts P2P from people I paid by Paypal transfer because I don’t have a Bitcoin account. Finally, my name was removed from the list of supposed scammers.
These Bitclout vigilantes are certainly well-meaning and some of their actions may be helpful, but they should at least contact the creators for an explanation before posting their name on this kind of slanderous list. It is very easy and quick to destroy the reputation of a hard working creator based on suppositions, and the damage is irreparable.
THE HECTIC LIFE OF MR. CLOUTER
TO BE CONTINUED IN OUR NEXT ISSUE
CloutZine is also published on Clouters.net.