{"id":49593,"date":"2022-06-04T10:06:06","date_gmt":"2022-06-04T02:06:06","guid":{"rendered":"http:\/\/www.upgrademag.com\/web\/?p=49593"},"modified":"2022-06-04T10:06:09","modified_gmt":"2022-06-04T02:06:09","slug":"sophos-lifts-lid-off-liquidity-mining-crypto-crime","status":"publish","type":"post","link":"http:\/\/www.upgrademag.com\/web\/2022\/06\/04\/sophos-lifts-lid-off-liquidity-mining-crypto-crime\/","title":{"rendered":"Sophos lifts lid off liquidity mining crypto crime"},"content":{"rendered":"\n

Sophos<\/a>, a global leader in next-generation cybersecurity, recently released threat research about nascent cybercrime in the article, \u201cLiquidity Mining Scams Add Another Layer to Cryptocurrency Crime<\/a>.\u201d The article is the first in a series lifting the lid off scammers who are taking advantage of the hype about cryptocurrency trading and the vast sums of digital wealth users have made (and lost) in crypto markets to lure in and swindle would-be investors.<\/strong><\/p>\n\n\n\n

In the investigative article, Sophos explains how the complexity of cryptocurrency and decentralized finance (DeFi), the foundations of liquidity mining, create the ideal environment for criminals to easily camouflage and carry out their malicious intentions. Scammers are not shy when it comes to targeting their victims; they proactively spam recipients via Direct Message on Twitter, What\u2019s App, Telegram, and other social networking platforms, and innocuously chat about liquidity mining to put targets at ease. From there, scammers escalate the swindle.\u00a0<\/p>\n\n\n\n

\u201cInteractions from a single Direct Message on Twitter led to Sophos\u2019 investigation that uncovered several liquidity mining fraud rings. Liquidity mining is a form of cryptocurrency-based investment in DeFi that even when \u2018legitimate’ is both dubious and complicated,\u201d said Sean Gallagher, senior threat researcher at Sophos. \u201cThe strategies behind the investments themselves are complex, and there\u2019s no regulation beyond the \u2018smart contract\u2019 code embedded in the DeFi network\u2019s blockchain \u2014 code that many people can\u2019t easily interpret even when it\u2019s publicly published. There\u2019s also a shortage of reliable information for new investors on how these networks work. Despite these risks, liquidity mining is the latest cryptocurrency investment craze, but because of these factors it\u2019s also the perfect platform for scammers to leverage. Unfortunately, we expect liquidity mining CryptoCrime to continue; it hasn\u2019t peaked. Hundreds of millions of dollars are at stake.\u201d<\/p>\n\n\n\n

How Liquidity Mining Works<\/strong><\/p>\n\n\n\n

Legitimate liquidity mining makes it possible for DeFi networks to automatically process trades using digital currency such as Ethereum, the preferred cryptocurrency for liquidity mining. Smart contracts built into the DeFi network must rapidly determine the relative value of the currencies being exchanged and execute the trade. Since there is no centralized pool of cryptocurrency for these distributed exchanges to pull from to complete trades, they rely on crowdsourcing to provide the pool of cryptocurrency capital required to complete a trade \u2014 a liquidity pool.
To create the liquidity pool \u2014 which handles transactions between a single pair of cryptocurrencies, such as Ethereum and Tether \u2014 investors commit equal values of both cryptocurrencies to the pool. In exchange for lending that cryptocurrency to the pool, the investors get a reward based on a percentage of the trading fees associated with the DeFi protocol.

Investors also receive liquidity pool tokens (LP tokens) \u2014 a representation of their share of the pool. These tokens can be \u201cstaked,\u201d or linked back to the exchange, further committing the original contribution, and earning the investor dividends in the form of another cryptocurrency associated with the DeFi project. The value of these reward tokens can vary widely.

\u201cThe mechanics of liquidity mining in its legitimate form provide the perfect cover for old fashioned swindles re-minted for the cryptocurrency age,\u201d said Gallagher. \u201cCriminal liquidity mining schemes, like traditional Ponzi schemes, give targets the illusion that they can pull their money out at any time \u2014 even allowing them to make withdrawals early on. But scammers will continuously urge targets to keep investing and to \u2018invest big\u2019 by obscuring what\u2019s really happening with fake applications, phony profit reports and the promise of lucrative pay outs. In reality, scammers have gained control of their targets\u2019 cryptocurrency wallets and are withdrawing currency whenever they want. Gradually, scammers empty the wallets, all while continuing to assure targets that everything is fine, and finally cut off communications.\u201d
<\/p>\n","protected":false},"excerpt":{"rendered":"

Scammers are not shy when it comes to targeting their victims; they proactively spam recipients via Direct Message on Twitter, What\u2019s App, Telegram, and other social networking platforms, and innocuously chat about liquidity mining to put targets at ease. From there, scammers escalate the swindle.\u00a0<\/p>\n","protected":false},"author":6,"featured_media":49594,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[19],"tags":[286,54,2103,206],"class_list":["post-49593","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-headlines","tag-it-security","tag-security","tag-security-breach","tag-sophos"],"_links":{"self":[{"href":"http:\/\/www.upgrademag.com\/web\/wp-json\/wp\/v2\/posts\/49593","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/www.upgrademag.com\/web\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/www.upgrademag.com\/web\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/www.upgrademag.com\/web\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"http:\/\/www.upgrademag.com\/web\/wp-json\/wp\/v2\/comments?post=49593"}],"version-history":[{"count":0,"href":"http:\/\/www.upgrademag.com\/web\/wp-json\/wp\/v2\/posts\/49593\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/www.upgrademag.com\/web\/wp-json\/wp\/v2\/media\/49594"}],"wp:attachment":[{"href":"http:\/\/www.upgrademag.com\/web\/wp-json\/wp\/v2\/media?parent=49593"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/www.upgrademag.com\/web\/wp-json\/wp\/v2\/categories?post=49593"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/www.upgrademag.com\/web\/wp-json\/wp\/v2\/tags?post=49593"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}