This article was originally published as part of Flarnchain Newsletter #37, published on October 20, 2021. If you would like to subscribe to the Flarnchain Newsletter, consider adding your e-mail address on the Flarnchain Website at https://www.flarnchain.com
RUGPULLS and SCAMS
I had been meaning to write a few newsletters where I discuss the dark side of crypto investing (really any investing actually), and that's the presence of bad actors. There are people who prefer to cheat, steal, and lie to get ahead in all walks of life. In sports, in work, in relationships, in traditional finance, and yes... unfortunately... even in crypto.
I have learned a lot about the various flavors of scams, hacks, and other nefarious acts in the crypto-markets over the past year or so, but the best way to learn something and have it stick, is through direct firsthand experience.
You read that sentence correctly folks. I was scammed. Hard. I bought into an NFT project that turned out to be a "Rugpull". In simple terms, a rugpull is when the creator of a project promises one thing, and then intentionally doesn't deliver as soon as they receive the money to deliver.
While not identical, Rugpulls are sort of similar to Pump 'N Dumps, where basically, the people in the inner circle of a project, gate information to create fake hype and buying pressure, selling assets on the way up.
From "Anatomy of a Pump" on
www.bitfalls.com
In traditional financial markets, due to heavy regulation, these types of scams take a while to unfold, and are 100% illegal. However, in the crypto markets, where things move at a million miles per hour, a scammer can spin up a project, attract a decent amount of excitement over their project, build a following, and then as soon as they receive the funds, they "pull the rug" out from underneath the investors and disappear into thin air.
Now, if you have been reading the Flarnchain newsletter for the past several weeks, you will know that I've gone deep down the rabbit hole of NFTs. I'm a sucker for collectibles and art. Being super passionate about crypto and Web 3.0, the NFT collectible space is almost specifically designed for my interests. I had been dabbling in the NFT space and getting some cool artworks of different cartoon animals, such as Convicted Squirrels, Bullish Llamas, and Toasty Turts, when a project caught my eye.
From left to right: Bullish Llama #9545 - Lives on the Ethereum blockchain
Convicted Squirrel #261 - Lives on the Ethereum blockchain
Toasty Turt #2329 - Lives on the Solana blockchain
It was a project I discovered while researching an NFT project that I personally wanted to create. I don't know if you recall, but last week I mentioned that I wanted to create a generative art project using Trees as the artwork, and to donate a portion of the NFT sales to planting trees in the real world.
FlarnTrees Concept artwork.
Well, while researching this concept, I discovered that... There's like 10 other projects that are already doing this same thing. That's okay though, turns out a lot of the people in the NFT space are just looking to make a quick buck, and steal and lie to make it happen. I discovered a project called SolTimber. SolTimber had a thriving Discord community, incredibly cool artworks, and an attractive roadmap that would culminate in your NFT tree bearing seeds you could plant in some sort of digital metaverse forest. All NFT trees would live together in this forest, and there would be some sort of online game associated with it. Like an MMORPG (such as World of Warcraft), but with trees.
SolTimber concept art. Dang. This art is incredible. I still want one of these... even after being scammed.
Having grown up on a Christmas tree farm, I couldn't resist! I immediately started chatting on the discord server, asking questions to the developers about the project. I eventually got "whitelisted" because I posted an animated GIF of a tree blasting off into space (a reference to all the sick GAINZ we were going to make on our trees). See exhibit A:
Pretty slick animation right? I had to learn some stuff on OpenToonz to create this.
Anyways, after getting whitelisted because of my sick fanart, I was in! I now had the chance to participate in what is called a "pre-mint" which basically means you get to go on the website early and "mint" one of the randomly generated NFT Trees that was going to make me exceptionally wealthy some day.
Here's one of the "ultra rare" trees they teased for the project.
The moment came on Sunday, October 18, 2021 at 3pm. The Bears were playing the... whoever they were playing, and I was sitting anxiously at my computer getting ready to mint my SolTimber NFT that was going to provide handsome profits to me and several future generations of offspring.
2:15PM: I take a peek at the Discord server, and I see one of the community members start saying "Red flag" and "Rug pull", so I get concerned. See, the marketplace that SolTimber was going to be listed on after the initial mint was called Magic Eden. This is a secondary marketplace for NFTs on the Solana blockchain. Magic Eden had apparently not listed the project, which conflicted with the official reports from the developers of the SolTimber project. This spooked me.
2:30PM: I head over to the Magic Eden Discord server and start asking questions about SolTimber project.
2:45PM: After a few uncomfortable minutes, one of the moderators of the Magic Eden discord server said the following:
Hey! Just got a confirmation that we are indeed in contact with them and planning their listing on our platform 
2:46PM: I breathe a sigh of relief, and hopped back on the SolTimber discord letting everyone know what the Magic Eden people said.
3:00PM: It's mint time baby!!! I click mint. SUCCESS! I check my Phantom wallet for my freshly minted SolTree, and I see this:
hmmm. Interesting. A seed? To grow into a tree? Cool!
3:15PM: The SolTimber team deletes the entire discord server, the website, and Twitter account, disappearing without a trace.
Now I didn't invest any more than I was willing to lose, so it did not really have any impact on me financially (other than the fact that if the lying, cheating, stealing team had followed through with their roadmap, I would be rich right now).
I was OFFICIALLY rugpulled.
However, the rugpull did have a big effect on me psychologically. I felt kind of violated in a way, and I felt surprised that a group of people would go through so much work just to steal from some many people. Like, they created all this beautiful art and then just... did nothing with it other than luring people in to take their money. The thieves who did this, took a lot of money. By my calculations, they probably stole around $300k to $400k. I haven't quite figured out how to track the wallet that received the stolen funds (because the Solana blockchain block explorer is really weird and confusing) but once I do, I'll report the total amount stolen.
To give you an idea of the amount of hype this project generated, I chatted with someone in the Discord who actually got a tattoo of one of the artworks on his leg. The tattoo looks freaking amazing, but it's bittersweet given the circumstances. I asked for his permission to show the below image:
Sick ink, Poya - FUD. Thanks for letting me share.
For those of you looking for some takeaways, I'll leave you with three lessons that I plan to stick to in the future (I already follow Lesson 1).
- Lesson 1: Never invest more than you are willing to lose.
- Lesson 2: Do not invest in an NFT project where the developers have not disclosed their real identities or who do not have a track record of other projects.
- Lesson 3: Secondary marketplace verification does not mean that the project is legit.
I'll probably need to write part two, the redemption arc, next week or in a couple weeks. Turns out, there's just too much to say about this stuff, and I've never been accused of being too concise. If you would like to learn a bit more about rugpulls and other scams in the NFT space, I strongly recommend you check out this video by the Youtuber Giancarlo Buys Tokens. He does a great job of concisely laying out the facts behind various trends in the NFT space. Here's the video: Giancarlo Buys Tokens on Scams in NFTs
Alright, that's my story. Hope to maybe write a story about the redemption arc some time later!
As always, thanks for reading!
-Flarn
Flarn Card 25.
Rarity: Common
Size: Large
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