Overview
The victim expects profit from investing in a cryptocurrency with a liquidity pool, such as in a decentralized exchange (DEX) or through meme coins.
How It Works
A meme coin liquidity pool scam, commonly paired with "rug pull" or "pump and dump" technique, is where malicious developers create a new cryptocurrency token, attract investors to provide capital, and then withdraw all the valuable assets from the pool, leaving investors with a worthless token.
Another variation is called liquidity mining or yield farming scam, where the victim expects to earn passive income by staking cryptocurrency in a liquidity pool, but the scammer has instead introduced a fake app or platform that falsifies the liquidity pool numbers.
The appeal to "earn passive income" is a big psychological draw for liquidity pool mining scams.
Timing is also important for these scams. The liquidity pool needs time to build up and then to be drained out.
Related Articles
Slow is Fast! Dissecting Ethereum’s Slow Liquidity Drain Scams - academic paper
Crypto Scam Tracker, California Department of Financial Protection and Innovation - shows hundreds of narratives from real victims. Includes crypto addresses, screenshots, and URLs.
Related Crime Schemes
A particular instance of this scam may embed one or more of these related schemes.
Fraudulent Platform: Any scheme that relies on custom built software that assists the crime. Includes fraudulent trading platforms, fraudulent clickworking platforms, and the like.
Pump-and-Dump: A pump and dump scheme is a type of investment fraud in which promoters falsely hype up a new or obscure stock so that new investors will rush to buy it, thus inflating the price (the "pump"), at which point the scammer sells their portion of the stock at these high prices (the "dump"), leaving the other investors with a worthless stock.
Victim Targeting Context
The scammer may use one or more of the following techniques to reach the victim.
Advertising Approach: The scammer uses advertising to passively reach the victim.
Targeted Conversational Approach: The scammer approaches the victim through targeted, topical online conversation.
Social Engineering: Psychological Manipulations
The scammer may use one or more of these psychological techniques to accomplish the scam.
Boost of Trust: The scammer employs an initial boost of trust technique to increase trust with the victim. An example is letting the victim withdraw some of their earnings in order to show that the scheme is legitimate.
Celebrity: The scammer claims a celebrity endorsement in order to increase trust or interest from the victim.
Codes or Jargon: The scammer will often use codes or technical jargon about finance or cryptocurrency to confuse the victim or to add legitimacy to the scam.
Complexity: The scammer has a complicated story to explain the scam, or leverages scientific/economic complexity in order to confuse the victim.
Easy money: The scammer promises easy money or makes appeals designed to leverage victim's greed.
Gradual Commitment: The scammer asks the victim to make a small commitment at first, but these escalate over time.
Peer Involvement: The scammer uses the victim's peers to encourage the victim to engage in the scam, claiming that "others are doing it" or suggesting that the victim will miss out. Often the peers are also scammers.
Social Engineering: Impersonation Techniques
The scammer may impersonate one or more of the following groups as part of the scam.
Banking / Finance: The scammer impersonates a banking official or financial institution.
Business or NonProfit: The scammer impersonates a business or nonprofit.
Catfishing: The scammer creates a fictitious online profile or persona.