Experts warn that cybercriminals and fraudsters are joining the DeFi rapture to deceive people with hard-earned cryptocurrency tokens.
Cybersecurity researchers from Safas found a current company that preys on those who know little about the nascent cryptospace, which is decentralized finance (DeFi), and is slowly sucking out their funds until nothing is left.
Sophos calls the new companies “liquidity fraud” and urges everyone involved in crypto trading to be wary of offers that sound too good to be true.
Make millions or lose thousands?
Rise of Art blockchain gave birth to something known as “smart contracts” – essentially pieces of code that act as intermediaries and allow two parties to engage in value transactions if certain conditions are met, without the need for an intermediary.
With the help of smart contracts, decentralized finance has risen – a general term that covers a range of services usually offered by centralized entities (trade, lending, etc.). When it comes to cryptocurrency trading in a decentralized environment, there must be a pool of liquidity for both currencies exchanged.
Users are encouraged to provide this liquidity (essentially, lend their coins) by receiving, among other things, a percentage of the trading fee associated with a particular DeFi protocol. To do this, they often need to connect their crypto wallets (such as MetaMask) with the DeFi protocol.
And here are the scammers. Sophos says they will create fake apps, fake protocols or fake tokens and reach potential targets through social media using fake faces. After a little innocent talk they will try to convince the victim to provide liquidity for a certain pair of cryptocurrencies that seem to promise big profits.
They will even create false reports to further convince the victim of high wages, and in some cases they will even allow withdrawals at the earliest stage. However, they will encourage victims to keep investing big to earn even more. But in reality the target victims were drained until nothing was left.
As soon as the targets were taken away for everything they had, the attackers simply disappeared into the air.