Trusted a large corporation, but now facing controversy over the 'exit scam NFT project.
As the Non-Fungible Token (NFT) market emerged between 2021 and 2022, a variety of NFT projects were launched, but many of them are now facing controversy due to improper management. There is growing concern about the so-called 'soft rug pull,' where projects attract investment by presenting convincing visions but fail to execute their business plans or simply abandon them.
A rug pull is a fraudulent act in which funds are raised with the intent to deceive investors and then the perpetrators disappear or abruptly cease operations. In a soft rug pull, the business appears to be legitimate on the surface, but the funds are not used for their intended purpose or the project is poorly managed over time, indirectly causing financial damage to investors.
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In the NFT market, rug pull scams are becoming increasingly common. According to the UK-based security firm Comparitech, there were 356 cases of rug pulls and scams in the global cryptocurrency market last year, a 5.4-fold increase compared to 65 cases in 2021. Of these, 274 cases were rug pull scams in 2022, nearly six times more than the 46 cases in 2021.
Hyeonsu “Elliot” Jin, an attorney at Decent Law Firm, commented, "As the initial NFT boom fades, inquiries about lawsuits related to NFT rug pulls have surged. It is crucial to secure clear documentation on the identities of the project operators, promotional and investor relations (IR) materials, and the usage of raised funds."
