Letter 2 - Apymon

The largest NFT rug pull ever?

For those that haven’t been paying attention - Apymon rug pulled their project overnight. In case you don’t know what a rug pull is, here’s a definition from CoinMarketCap:

A rug pull is a malicious maneuver in the cryptocurrency industry where crypto developers abandon a project and run away with investors’ funds. Rug pulls usually happen in the decentralized finance (DeFi) ecosystem…

This might well be the largest NFT rug pull that has ever taken place. Napkin math suggests that they earned ~860 ETH ($2,277,280 at today’s price) in egg sales. They gave out maybe 25% of that in gifts and prizes inside the eggs. The rest of the money was meant to be spent on creating the creatures and delivering on the promises made to the community in their road map.

A lot of people are going to be caught blindsided by this, especially if it’s their first experience being rug pulled. It’s not a pleasant feeling. That said, there were warning signs. Hoo boy were there warning signs. Let’s look at a few of them, and see if we can learn anything.

  1. Of the 6,400 eggs, 13 were “Ultra”. These had a lot more value. They were meant to be randomly distributed to all egg holders. Well the lead dev on the team, “HappyMagic” just so happened to buy two and only two eggs and they BOTH turned out to be Ultra. The odds of this happening? (13/6400)*(12/6400) = 0.00038%. Not impossible, but pretttttty impossible. He then proceeded to list the eggs on opensea for 100 eth each. Apparently he didn’t want them to sell, he just picked a crazy high price he thought nobody would buy them at. Yeah, okay. Lesson: if it walks like a duck and talks like a duck…

  2. Inside a random selection of the eggs were a bunch of high value prizes given as incentives for people to buy the eggs. These included two CryptoPunks, Meebits, pieces of artwork by Beeple, and straight up 1 ETH in some of them, as well as many more smaller prizes. Someone was able to read the contract and discover which eggs contained which prizes (minus the punks since they hadn’t been added yet) before the team revealed this information - leading to the opportunity to buy these eggs on the secondary market before the owner of the egg knew they had anything of value inside. Lesson: be careful listing things on the secondary market when their value has the potential to dramatically shift.

  3. Sometime around Mid-May the lead product/community manager of the project “Archie” just disappeared. Nobody has heard from him since. All announcements now came only from the dev “HappyMagic” or one of the discord moderators. Lesson: This one is pretty obvious but when someone goes AWOL from a project, it’s no bueno.

  4. When they finally allowed people to open their eggs to claim their prizes they included the two CryptoPunks - one included in an egg in the #0-5999 range and the other in an egg in the #6000-6400 range. Someone figured out a way to hack the contract (using the “meebit” hack) and was able to steal one of the punks from the #6000-6400 group. Lesson: We’re in an emerging space and contracts are going to be hacked, but the fact that this happend after another similar hack happened means that the devs clearly were not on the ball. Invest in projects with smart and savy devs, not in ones that drop the ball.

I think that covers the major red flags, but there have been a lot of smaller ones too such as the most popular discord mod CryptoRobo being fired from his position and some inexplicable delays with allowing people to open their eggs and claim their creatures.

All this led to yesterday when HappyMagic was telling the community he was trying to get things back on track, he wanted to get CryptoRobo back, he wanted to get new people on board, and move forward. A few hours later..

The website was then taken down and the rug pull was complete. HappyMagic has left the building.

**Breaking news** - as far as breaking news can go in a Newsletter. But as I was writing this post, the project manager Archie just popped his face back into Discord and announced that he was ‘back’ and had a private situation that he had to deal with. He was completely absent for the past 3 weeks with zero communication, and now 12 hours after the website is taken down and the lead dev leaves he is “back”. Let’s call this red flag #5, in case anyone still has faith in the project.

As I write this people are trawling through his etherscan and finding that he made $100k+ trades while he was awol with his “family emergency”. I’m not judge, jury and executioner - but this does not look good.

Alright we’ve looked at what’s happened - what can we learn from all this?

  1. Pay attention to the red flags. Too many people stay completely invested in a project “no matter what”. They will believe whatever is told to them, and end up going down with the sinking ship. There were a lot of warning signs with this one.

  2. Crypto is RISKY business. Most of the people and projects you are dealing with have no regulatory body to answer to, and most of the time you have no idea who you’re dealing with. Be careful.

  3. Do your own research. It’s easy to jump aboard hype trains and stay on too long. It’s easy to believe what you want to, that everything is going to be rosy and the project is going to get back on track and even moon and our investments are going to be worth 10x what we paid. It’s hard to tell yourself this is unlikely, and it’s hard to…

  4. Sell at a loss, sometimes. It’s better to get out with 35% of your investment than 0, which is close to what apymon eggs and creatures are selling for on the secondary market now.

So what now? The Apymon discord community is fairly strong still and there are a lot of community members that want to keep the project running on their own. They want the reigns handed over to them, and if the project has any hopes of climbing out of this enormous hole, I believe this is the only option. They need to rebrand and get a new team together and pull a rabbit out of a hat. It is going to be a LONG uphill climb. I wish them the best.

Stay safe out there everyone.

We’re still early.

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Disclaimer: The content covered in this newsletter is not to be considered as investment advice. I’m not a financial adviser. These are only my own opinions and ideas. You should always consult with a professional/licensed financial adviser before trading or investing in any cryptocurrency related product.

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