Squid Game crypto token collapses in apparent scam

Squid Game crypto token collapses in apparent scam

A digital token inspired by the popular South Korean Netflix series Squid Game has lost almost all of its value as it was revealed to be an apparent scam.

Squid, which marketed itself as a “play-to-earn cryptocurrency”, had seen its price soar in recent days – surging by thousands of per cent.

This kind of scam is commonly called a “rug pull” by crypto investors.

This happens when the promoter of a digital token draws in buyers, stops trading activity and makes off with the money raised from sales.

Squid’s developers have made off with an estimated $3.38m (£2.48m), according to technology website Gizmodo.

“Play-to-earn” cryptocurrency is where people buy tokens to use in online games and can earn more tokens which can later be exchanged for other cryptocurrencies or national currencies.

Last Tuesday, Squid was trading at just 1 cent. In less than a week its price had jumped to over $2,856.

Its value has now plummeted by 99.99%, said cryptocurrency data website CoinMarketCap.

Squid was billed as a token that could be used for a new online game inspired by the Netflix series – which tells the story of a group of people forced to play deadly children’s games for money. The game was due to go live this month.

However, cryptocurrency experts had warned of several tell-tale signs that it was likely to be a scam.

Most telling was that people who bought Squid tokens were unable to sell them.

Critics also highlighted that its website contained many spelling mistakes and grammatical errors. The website is no longer online and social media accounts promoting the tokens have also vanished.

“It is one of many schemes by which naïve retail investors are drawn in and exploited by malevolent crypto promoters,” Cornell University economist Eswar Prasad told the BBC.

Professor Prasad said buyers need to be aware when buying cryptocurrencies as there is almost no regulatory oversight.

“In fact, open pump and dump schemes are rampant in the crypto world, with investors often jumping in with eyes wide open, perhaps hoping that they can ride the wave and dump their holdings for a quick profit before prices collapse,” he said.

Squid was available for sale on decentralised crypto exchanges including PancakeSwap and DODO, which allows for buyers to connect directly to sellers, without a central authority.

“Nowadays new coins can be listed on decentralised exchanges on the first day they are created, without any regulation or due diligence,” said Jinnan Ouyang from Singapore-based crypto company Openmining.

“So you could be buying coins from anyone with any agenda.”

SEC statement on stablecoin report by the working group

SEC statement on stablecoin report by the working group

Today, the President’s Working Group on Financial Markets (PWG), along with the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency, published a thoughtful report on stable value coins, or so-called stablecoins.

Stablecoins are crypto tokens pegged or linked to the value of fiat currencies. The existing stablecoin market is worth nearly $130 billion, having grown 20-fold in the last 20 months.

These stablecoins are embedded in crypto trading and lending platforms. Though they represent only about 5 percent of all crypto assets, in October, more than 75 percent of trading on all crypto trading platforms occurred between a stablecoin and some other token.

As the report notes, “stablecoins, or certain parts of stablecoin arrangements, may be securities, commodities and/or derivatives.”

Thus, the use of stablecoins presents a number of public policy challenges with respect to protecting investors.

Further, stablecoins may facilitate those seeking to sidestep a host of public policy goals connected to our traditional banking and financial system: anti-money laundering, tax compliance, sanctions, and other safeguards against illicit activity.

As the report also acknowledges, some stablecoin issuers may seek for these tokens to be used for payments in the future. This, along with the intertwined nature of stablecoins with crypto trading and lending platforms, raises emerging financial stability concerns.

The PWG report highlights a number of recommendations to address these public-policy challenges. While Congress and the public evaluate this report, we at the SEC and our sibling agency, the Commodity Futures Trading Commission, will deploy the full protections of the federal securities laws and the Commodity Exchange Act to these products and arrangements, where applicable.