Most Crypto Scams on BNB Chain, Solidus Labs Says

Crypto risk monitoring platform says it has flagged nearly 200,000 crypto rug pulls and decentralized finance scams since August 2020.

AccessTimeIconOct 27, 2022 at 1:00 p.m. UTC
Updated Oct 31, 2022 at 5:16 p.m. UTC

Nearly 12% of all BEP-20 tokens, the standard token on BNB chain, are tied to scams, according to recently released research from crypto risk monitoring firm Solidus Labs.

“While some of the big rug pulls and scams make the news, like the famous Squid Games Token that’s estimated to have cost users around $3 million in lost funds, the full picture stemming from our data shows the vast majority of these scams go unnoticed,” Solidus Vice President of Regulatory Affairs Kathy Kraninger said in a statement. Before joining Solidus, Kraninger ran the U.S. Consumer Financial Protection Bureau.

The research firm said it detects 15 deployed scams every hour. In the past two weeks, it has found more than 188,525 smart contracts scams across twelve major blockchains.

Aside from rug pulls, which are fairly well known in decentralized finance (DeFi), Solidus says it is seeing an increase in token impersonation scams, where a fraudulent token contract is deployed that copies a well-known token symbol to trick victims into investing.

Data released in December from Chainalysis, another crypto analytics firm, says that investors lost $2.8 billion to rug pulls during 2021.

In its release, Solidus Labs did not elaborate as to why BNB Chain has a higher percentage of contract scams than Ethereum. Its research shows that 8% of all ERC-20 tokens on Ethereum exhibit fraudulent characteristics.

CoinDesk - Unknown

(Solidus Labs)

In early October, BNB Chain was hit with a $100 million exploit. As Binance has close relationships with most of the chain's validators, it was able to freeze some of the stolen funds by pushing out a software update. In 2021, a company rep said that Binance is not responsible for "rug pulls" or fraud that occurs on-chain.

“BSC is a public permissionless infrastructure so anybody can deploy projects there,” Samy Karim, a coordinator of business and ecosystem development at Binance, said at CoinDesk's Consensus 2021. “You have malicious actors there and hacks, and exploits in DeFi are not new and definitely not unique to BSC.”

According to DeFi Llama, BNB Chain makes up 10% of all value locked in DeFi, at $5.6 billion. Ethereum, meanwhile, has 58% of the total value locked at $32 billion.

Solidus Labs estimates that at least $910 million of scam-related ether has flowed through centralized exchanges.

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