The first NFT rugpull this year has reportedly cost investors nearly $1.3 million – here’s what that means

The first NFT rugpull this year has reportedly cost investors nearly $1.3 million – here’s what that means
Representative imagePixabay
  • NFT rug pulls are essentially crypto scams, where NFT creators run away with investors’ funds.
  • Creators of a project called Frosties disappeared off the Internet almost overnight, dropping the value to nearly 0.
  • Frosties had sold 8,888 NFTs on OpenSea earlier this month.
We’re less than 15 days into 2022, and the first big non-fungible token (NFT) rug pull has already happened. The creators of Frosties, a collection of animated penguins wearing colourful and quirky clothing, disappeared off the Internet overnight. Shortly after the sale, developers of the project have shut all communication channels.

Earlier this month, 8,888 NFTs were sold on OpenSea - one of the most popular NFT market places - at an average floor price of 0.04 ether. The price of the 8,888 NFTs in the Frosties collection have subsequently dropped to nearly zero, and investors have reportedly lost as much as $1.3 million in total. OpenSea hasn’t commented on the incident so far.

NFT “rug pull” refers to a situation where the creators of a collection use mediums like social media to drive pricing of their NFTs, eventually withdrawing the liquidity and abandoning the project. Which in turn drives the prices of the non-fungible tokens (NFTs) to zero.

“First rug pull of the year = FROSTIES NFT. Web, Twitter, and Discord down simultaneously. They put a lot of effort into their Discord for weeks with sneak peaks, games/quizzes, etc. Sometimes this space sucks,” a Twitter user noted.

On the other hand, the Cryptopunks and Bored Apes NFT projects are constantly being managed and developed by their creators. While they may not issue new NFTs all the time, the projects offer special access to events, tie-ups with brands and more, which keeps the prices of the NFTs upwards. In comparison, the creators of the Frosties project have basically withdrawn the money off the smart contract behind the project and disappeared.

However, all may not be lost yet. According to Blockworks, a moderator on the new Discord for the project said that they are working to gain control of the project. It seems that despite the scammy nature of the project, the community behind it wants to keep it running.

Not the first rug pull when it comes to NFTs

While the Frosties rug pull is the first of its kind in 2022, this isn’t the first such incident ever. In 2021, OpenSea was able to take action when an NFT collection by artist Todd Kramer was stolen. The platform froze the stolen assets, which were worth over $2 million at the time. This included 16 Bored and Mutant APE NFTs, which could no longer be traded on the platform.

Similarly, in October 2021, a project called Iconics led to a rug pull worth 1000 SOL, worth almost $150,000 at the time of writing. The artist behind the project had promised 8000 randomised 3D artworks in NFTs, but ended up delivering some random emojis. The artist subsequently withdrew all the money from investors and deleted their Twitter accounts and Discord server.

Incidents like this are amongst the many reasons why many experts call for regulatory oversight on NFT trading. OpenSea, for instance, has seen 30-day trading volumes rise to over $2 billion on the back of successful projects like Bored Apes, Cryptopunks and more. While one could argue that incidents like Frosties aren’t particularly rampant, the fact that their value in fiat currency can run into the millions could drive regulatory pushback against such sales.

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