A cryptocurrency project claims that a promotional token airdrop campaign led by CoinMarketCap was riddled with “fraud,” causing its token price to plummet.
Two cryptocurrency projects have accused CoinMarketCap (CMC) of rigging promotional airdrops on their behalf, which they claim were “gamed” for the benefit of a small group of exploiters.
These promotional airdrops, which were supposed to be distributed to thousands of wallets in order to raise awareness of a crypto project, ended up funneling to only a handful of wallets, implying possible system manipulation.
Solution for Blockchain Advertising According to SaTT, a promotional airdrop it paid CMC to conduct in December 2022 resulted in 84% of the airdropped tokens going to just 21 wallets.
According to CoinGecko data, the promotion was supposed to award 25,000 winning wallets with 4,000 SATT each, which was worth $6.30 at the time.
However, SaTT claimed that shortly after the airdrop, 20,953 wallets “automatically transferred the tokens to 21 wallet addresses,” which then sold their token holdings days later around Dec. 10, netting those 21 wallet owners around $142,000.
Between the end of the airdrop on December 1 and when the wallets sold their tokens on December 10, the price of SATT fell by 70%.
TokenBot co-founder Shaun Newsum shared a similar experience, telling Cointelegraph that the company did a similar CMC-led airdrop of its TKB token on December 9.
CMC provided 30,000 airdrop winners, according to Newsum, but he chose to “stagger” the airdrop “just in case something happens.”
To begin, TokenBot distributed tokens to 4,000 winners, but around 3,300 of them ended up sending the funds to a single wallet, according to Newsum.
TokenBot lost around $20,000 in the incident, according to Newsum, and the project had to deploy more liquidity from its treasury.
“Clearly, someone figured out how to game CMC,” he added. “If we had bulk sent, the entire airdrop would have been a complete disaster.”
Newsum, on the other hand, stated that he had since received an apology from CMC and was informed that the company was investigating the airdrop and would return with an updated winners list for the project.
SaTT claims that during its investigation, it discovered another 18 tokens or nonfungible tokens (NFTs) airdrops conducted by CMC since July 2022 that were also “infected by fraud” to the tune of $6.6 million.
Airdrops for projects such as TopGoal, OwlDAO, and AgeofGods were included.
SaTT proposed two scenarios for how the “fraud” could have occurred:
“Either a group of hackers injected tons of fake accounts [into the airdrop on CMC’s website] […] or it was actually an inside job.”
A CMC spokesperson addressed some of these claims to Cointelegraph, claiming that at least four of the projects identified by SaTT have yet to distribute rewards, making it “impossible” for them to have faced “malicious” activity.
It also stated that, while three projects, including SaTT, AgeOfGods, and TokenBot, have expressed their concerns to the CMC team, it has not received any communications from other projects regarding the alleged issues.
However, the spokesperson acknowledged that “bots are an issue that affects nearly every industry.”
“The industry has been dealing with this issue among airdrop programs for some time, and the reality is that no industry has been able to completely resolve the bot issue.”
“We are constantly working to improve our systems and services to limit this issue, and we will work closely with these projects to find solutions and help resolve any current issues,” said the spokesperson.
CMC also stated that it takes “very seriously” any claims of bot participation in its airdrops and is “working on resolving each case individually.”
It also disclosed several features used to discourage bot participation, such as a CAPTCHA challenge and email verification requirements for participants. It is also working on integrating two-factor authentication.
Cointelegraph reached out to TopGoal and OwlDAO for comment, but received no response at the time of publication. AgeofGods was unable to be reached for comment.
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