Web 3.0 and Metaverse: FinSoul Exit Scam

On October 10, blockchain security platform CertiK reported that the development team for gaming project FinSoul had allegedly pulled off an exit scam, taking away $1.6 million from investors through market manipulation.

The FinSoul team was said to have hired actors to impersonate its executives, then raised funds to create a gaming platform. Instead of creating the platform, the FinSoul team allegedly transferred $1.6 million in bridged Tether (USDT) from investors to itself. Blockchain data showed the developers then laundered the funds through cryptocurrency mixer Tornado Cash.

On May 23, DeFi project Fintoch posted a press release claiming it had adopted advanced technologies such as Unreal Engine 5 and Cocos 2D to develop a U.S.-based metaverse platform, which had gone live. However, on-chain sleuth ZachXBT reported that the original Fintoch DeFi project had actually performed an exit scam, taking away $31.6 million and bridging it to Tron blockchain in an attempt to launder the funds.

Rebranding and Technology in the FinSoul Project

In August, the FinSoul project “rebranded”, changing its name and social channels from “Fintoch” to “Standard Cross Finance (SCF)”. CertiK verified the real names of the persons listed as the CEO, chief operating officer and chief financial officer of the project, and found that they were all actors in the entertainment industry. Moreover, the project’s chief technology officer was listed on a promotional poster for an entertainment company, further proving that he was a paid actor. The identities of the other two people listed as “executives” could not be determined.

The rebranded SCF team continued to promote FinSoul on YouTube and Telegram, and even produced a video depicting an alleged “R&D Headquarters”, which was later revealed to be an office building in Campbell, California. A promotional video of an alleged event in Vietnam was also produced.

According to blockchain data, a token contract was deployed to the BNB Smart Chain network on Oct. 10. 100 million FinSoul (FSL) tokens were minted and transferred into the deployer account, and 3 million FSL were sent to other accounts. From there, the tokens were used to create a liquidity pool for FSL on PancakeSwap. This pool was then used by traders to buy and sell FSL.

The FinSoul project is an example of the Defi, NFTs, DAOs, and Web 3.0 technologies that are being used in the AI Image Generator, AI Story Generator, and other AI technologies. It also highlights the differences between Web 1.0, 2.0, 3.0, and 4.0, and the differences between Metaverse and Web 3.0.

Difference between Web 1.0, 2.0, 3.0 and 4.0

Data from DEX Screener reveals that FSL was initially priced at $0.3911 per token on Oct. 10 at 6:30 am UTC. Over the following hours, the price rose to $17.5774, before retreating from this peak and stabilizing at around $5. Then, between 4:30 pm and 5:00 pm UTC, the price suddenly plummeted, falling from approximately $5 to near zero.

The two events appear to have occurred between 4:25 pm and 4:35 pm UTC on Oct. 10, which may explain the sudden price decrease. At 4:25 pm, the FSL deployer account transferred the remaining 97 million FSL to another address. At 4:35 pm, this account sold all 97 million tokens into the liquidity pool, moving $1.6 million worth of Binance-pegged USDT from the liquidity pool into this account. This sale represented 32.33x the amount of FSL coins that had previously been circulating. This account subsequently transferred the drained funds to Tornado Cash through a series of transactions.

CertiK reports that the Standard Cross Finance team was able to convince investors to invest in its project again, despite twice draining funds from them. It has now relaunched FSL with a new token contract. At the time of writing, DEX Screener shows that the new version of FSL is valued at $1.29 per coin.

Cointelegraph contacted the Standard Cross Finance team but did not receive a response by the time of publication.

Rug Pulls and Exit Scams in Crypto Space

The FinSoul case serves as a warning for crypto investors to do their research thoroughly before investing in new projects. CertiK’s report suggests that the scam team managed to deceive investors twice and is now attempting a third fraud. It is important to be mindful and exercise due diligence when investing in projects that have no functioning blockchain.

Rug pulls, also known as exit scams, have been a persistent issue in decentralized finance. An example of this is the Xirtam protocol, which allegedly stole over $3 million from investors using a token sale in the summer. Fortunately, Binance managed to freeze the funds and return them to users via a smart contract starting from September 6.

Unfortunately, most rug-pull victims are not as lucky. In June, Chibi Finance removed more than $1 million of its users’ funds through a “panic” function and the funds have not been recovered yet. In 2021, PopcornSwap exit scam caused losses of over $11 million to investors and led to criticism of the BNB Chain development team.

This article can be collected as an NFT to commemorate this moment in history and to support independent journalism in the crypto space, which includes topics such as web 3.0 and metaverse, AI image generator, AI story generator, AI technology, Defi Web 3.0, differences between Web 1.0, 2.0, 3.0 and 4.0, Defi NFTs, DAOs and Web 3.0.

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