Cryptocurrency is often seen as a revolutionary technology, with the potential to revolutionize many aspects of our lives. However, it can also be used for nefarious purposes, as evidenced by the huge crypto rug pull incident involving Faruk Fatih Özer.
Özer was able to successfully scam investors out of billions of dollars before he was eventually arrested. This shocking event serves as an important reminder that we must remain vigilant when dealing with cryptocurrency and other digital assets. In this article, we will discuss five lessons learned from this incident and how the lack of regulation played a part in its success.
Who is Faruk Fatih Özer
Faruk Fatih Özer was the founder of Thorex, formerly Turkey’s biggest cryptocurrency exchange. He amassed a huge amount of wealth in his platform as people explored for hedges against the plummeting value of the Lira. Since gold was not easily available in the country, crypto served as a more viable alternative for people looking to preserve their wealth.
The situation served as an opportunity for Ozer to convince people to invest in crypto using his platform. It is estimated that investors poured a total of $2.5 billion into Thodex as a result of the event.
Everything appeared to be running smoothly until that fateful day of April 18, 2021. A halt in trading was experienced by Thodex users before it all went dark.
Ozer initially calmed them down by saying that it was a result of a hacking incident and that all their money was safe. Following that, he closed shop and reportedly fled the country.
It was later found that his company moved $125 million of its Bitcoin assets into Kraken, a US crypto exchange. Further investigation revealed $2.5 billion worth of investors’ money was scammed by Ozer.
The crypto scammer was later arrested in Albania and extradited to Turkey. He is currently facing a whopping 40,564 years in a Turkish prison if convicted of all charges.
Crypto Rug Pull
Rug pulling is a type of scam in the crypto space. It works when a founder promises big returns to investors but secretly sells off their own coins before the prices can reach their peak. People keep investing but don’t get the promised benefits because the founder has already taken their money and has run away.
It can also be as straightforward as where developers or creators will promote a project such as an initial coin offering (ICO) or non-fungible token release with the intention of taking investors’ money and then never being heard from again.
Important Lessons Learned from the Ozer Incident
As with any other unfortunate story comes lessons that can be learned. Here are things that we should remember to avoid falling prey to people like Ozer:
1. Crypto Regulation Matters
The lack of government oversight and regulatory framework for cryptocurrencies in Turkey enabled Özer to carry out a large-scale theft undetected or mainly ignored by the authorities. This incident serves as an example of why stronger regulations for digital assets are necessary to prevent similar occurrences in the future.
Without the proper regulations in the crypto landscape, it can be hard or even impossible for those affected by rug pulls to seek justice after they have been taken advantage of, making it all the more important to remain vigilant against these devious schemes.
2. Know Your Platform
It’s important to understand how different types of cryptocurrency exchanges work, their uses, and associated risks. Had investors taken the time to research Thorex before investing or have taken efforts to keep track of their investment in the company regularly, they may have been able to identify signs that something was amiss before it was too late.
3. Stay Vigilant with Investments
Some red flags should always be considered when making crypto investments such as unusually high returns or one-sided stories from founders. Making sure to critically evaluate any potential investments can help protect against fraud. Remember that if something is too good to be true, it probably is.
4. Security is Key
Keeping one’s crypto secure is paramount for preventing accidental losses or malicious activity. Using a wallet with strong encryption and storing funds away from exchanges can help significantly reduce the risk of theft.
On the other hand, if one opts to keep his/her money in a crypto exchange, it would be better for that person to diversify the funds among different exchanges. This way, the risk is mitigated or avoided altogether.
5. Watch Out for Exit Scams
Crypto rug pulls are an extreme form of “exit scam” where projects suddenly disappear after raising money, leaving investors with no recourse for recovery. It’s important to be aware of this type of scam and use caution when investing in new crypto projects.
In the case of Thodex, the April 18 incident was an indication that trouble was already brewing within the company. Be sure to watch out for sudden or long halts in trading as these could be an indication of a brewing rug pull within a crypto exchange platform.
Final Thoughts
The Faruk Fatih Özer rug pull incident serves as an important reminder of the potential risks associated with investing in cryptocurrencies. It is essential to remain vigilant and thoroughly research any project or investment before putting money into it. Additionally, proper security measures should be taken to protect one’s funds from malicious actors or accidental loss.
By taking these steps, investors can help ensure that they are not victims of fraud or other scams like those perpetrated by Özer. With this knowledge in mind, we can all become more informed crypto traders and make smarter decisions when it comes to our investments.