Cryptocurrencies are riddled with a dazzling array of scams. Rug pulls, a term for when developers take the money and run, are common. And NFTs, or non-fungible tokens, aren’t immune to that old trick, as thousands of investors of a project called Evolved Apes found out on Friday.
Evolved Apes is described on NFT marketplace OpenSea as “a collection of 10,000 unique NFTs trapped inside a lawless land.” They are “fighting for survival, only the strongest ape will prevail,” it says, referring to the project’s much-hyped fighting game, which hasn’t materialized.
A week after the project launch, the anonymous developer known as Evil Ape who promised that game vanished along with the project’s official Twitter account and website. But they left traces behind on the blockchain that shows they siphoned 798 ether ($2.7 million) out of the project’s funds in multiple transfers. The funds, derived from the initial public sale of NFTs and commissions on the secondary market, were meant for project-related expenses like marketing.
Evolved Ape investors noticed several red flags leading up to Evil Ape’s rug pull. After the public sale on September 24, the announcements seemed suspiciously unprofessional and several of the leaders were not around anymore, one investor who requested anonymity due to the ongoing fallout from the scam told Motherboard. But they chalked it down to lack of experience at the time. “I don't think this giant storm was ever what was expected,” the investor said.
According to Mike_Cryptobull, who did not share their real name due to their standing in the community, the Evolved Apes community discovered that the social-media competition winners (a marketing activity to create buzz) hadn’t received their NFT prizes from the project, and the artist hadn’t been paid either. To figure out what was going on, investors active on the project’s Discord server jumped on a voice chat last week. In that call, they appointed Mike_Cryptobull, who spent 3 ether (around $10,200) on 20 Evolved Apes, as their de facto fact-finding mission leader.
“And through piecing the bits together I could find out and the parts that all aligned, I put together my opinion in the pdf for the community,” Mike_Cryptobull told Motherboard. His report contained some bad news about Evil Ape, the admin who controlled the project’s blockchain wallet.
“What has happened is that Evil Ape has washed his hands of the project taking away the wallet with all the ETH from minting that was to be used for everything, from paying the artist, paying out cash giveaways, paying for marketing, paying for rarity tools, developing the game and everything else in between,” he wrote in the report shared with his fellow investors.
Even though the money is gone, the Evolved Apes community plans to carry on. Unlike with cryptocurrencies, NFT rug pulls leave behind JPEGs and a narrative surrounding them. Mike_Cryptobull explained in the report that he and others would build a new project called Fight Back Apes out of the ashes of Evolved Apes. Evolved Apes holders would be automatically approved for a Fight Back Apes token linked with the art from the old project.
“We will become the Fight Back Apes, fighting as a community against our nemesis Evil Ape,” he said. NFT investors who were promised a fighting game did find themselves in a fight after all.
None of this has put a serious damper on the Evolved Apes trade on OpenSea, where the project is still verified. There have been over 574 NFT sales with a total volume of 13.9 ether ($47,230) since Friday, when the rug-pull became public.
“Although we have tried many avenues to contact OpenSea, we are still awaiting a response,” said Josh_CryptoBull, another pseudonymous Fight Back Apes co-founder.
“Evil Ape is still receiving the 4% royalties [from each sale], and that is why we are here to make a new NFT [project] to bring the royalties back to the community.” OpenSea didn’t immediately respond to Motherboard’s request for comment.
Unlike Evolved Apes, which entrusted Evil Ape with sole access to the project wallet, Fight Back Apes will operate a multi-sig wallet, which requires multiple people to sign before anything can be done to funds. That doesn’t mean multiple people can’t collude and scam, of course.
There are more lessons from this bitter experience.
“Trust your gut if something doesn’t feel right,” Josh_CryptoBull said. “If there is a mistake, which happens, how it is dealt with will tell you a lot.” He added that “there were multiple red flags” in Evolved Apes early on, “but 99% of us were just blinded by the art and the promises and the potential profits we assumed would come.”
Two golden rules of crypto also apply here, said Mike_Cryptobull: do your own research, and don’t invest anything more than you can afford to lose.