Meme coins can be a laugh or even make you money – but they’re also scam central

Cryptocurrencies such as Shiba Inu and Doge are jokes that have created billionaires. But there's a more sinister side to so-called "meme coins", says Dominic Frisby, that could cost you dear.

Shiba Inu and dogecoin
Shiba Inu and Doge are jokes that have created billionaires.
(Image credit: © Jakub Porzycki/NurPhoto via Getty Image)

When people tell me bitcoin is a bubble, I normally just shake my head wearily and say: “No. It’s the future. You’re just saying it’s a bubble cos you don’t own any. A bubble is a bull market in which you don’t have a position.”

Then along came meme coins – the likes of Doge and Shiba Inu. They don’t seem to do anything – they’re just a laugh. And yet they’ve created multi-millionaires and billionaires.

Somebody showed me a wallet the other day. Just 400 days ago, the wallet’s owner bought $8,000 of Shiba Inu. They didn’t sell. Today those coins are worth over $5bn.

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Now that really is a bubble! How I wish I had had a position.

A mild defence of meme investing

The thing about meme coins is that everyone seems to know they are nonsense, and yet they still get on board for the ride. When they crash, many post their losses on social media. Even that’s become a meme now – “loss porn” – and so people can get attention that way.

Trading a hype cycle is a perfectly legitimate and effective method of speculating in an asset. Buy when nobody cares (or when there’s “blood on the streets” – us old timers even have our own expressions for it), and sell during the euphoria, when the mass media is all over it.

Meme coins follow exactly the same psychological journey, only more so.

“It’s just gambling”, say some. Well, yes. But isn’t most speculation? If you can do it in some informed way that gives you an edge over everyone else – be it detailed research or some technical method – then you have an advantage.

I suppose this is a loose defence of meme coins. The power of memes is something else – we saw that with Gamestop, Wall Street Bets and Robin Hood earlier in the year. Better get used to them; they are now a feature of the investment landscape. And if memes are promoting the asset you’re long of, well then great.

But a scam is a scam is a scam, no matter how you dress it up, and meme coins HQ is also Scamsville.

How a coin called Squid Game cost investors millions of dollars

A week or so yesterday, a new coin called “Squid Game” – $SQUID – began trading on Sushi Swap, a decentralised exchange. Apparently it was a “pay-to-play token to play an online game”, inspired by the hugely popular Netflix TV series.

The coin has absolutely nothing to do with the TV series, except that it shared the same name and so obviously planned to ride on the back of its hype. (Something similar happened earlier this year with another scam coin – Mando – which exploited the excitement around Disney’s “Mandalorian”).

The price action looked something like the following (I’m not even going to post a chart because it doesn’t tell the whole story). For some reason the coin would make a low first thing in the morning and then rise through the day, before dropping back the following morning. I’ll use 10AM prices.

  • Mon 26 Oct: $0.01
  • Tues 27 Oct: $0.06
  • Wed 28 Oct: $1.04
  • Thurs 29 Oct: $4.19
  • Fri 30 Oct: $13.00
  • Sat 31 Oct: $34.00

And so we come to Sunday 1 November. Here’s the hour-by-hour price action:

  • 01:35: $38
  • 02:35: $89
  • 03:35: $93
  • 04:35: $434
  • 05:35: $2,856
  • 05:40: $0.0007926

In less than five minutes the coin went from over $2,800 to around eight hundredths of a penny. And this was a Sunday morning – most of us in Europe were asleep. Markets are supposed to be closed.

This is the short-attention span, instant-gratification generation. It doesn’t have time for the compounded effects of 10% annualised incremental growth. It wants its hits now and it wants them big.

Well, it certainly got them here.

Looking at the trading volumes one assumes this was a creation from somewhere in the Far East, and given the Korean provenance of the TV series that would make some kind of sense. The broken English and bad grammar on the coin’s website and white paper would further suggest this to be so.

But in the murky borderless world of the decentralised internet, who knows where the perpetrators were – and lord knows who is going to police and prosecute this and where.

First comes the run-up, and then the rug pull

There is no better PR than price action, and $SQUID had it in spades. As a result, the media was all over the story. CNBC, the BBC, Yahoo News, Business Insider and Fortune were all running headlines about the new Squid Game cryptocurrency that had soared by 83,000% over just a few days. It only added to the hype.

None of them seemed to bother googling the name of CEO David Kanny, who, according to the $SQUID website, was a former University of California Irvine student with five years’ experience at Netflix – who doesn’t appear to exist. Nor did any of the other named execs – Mabel Jah, Kevin Sam, Christian Abbigail, Daniel Jolia and Lawrence Dan.

Nor did the media big guns report – or even notice – the bad grammar on the website or the white paper; that $SQUID’s Twitter account, which now had over 50,000 followers, did not allow replies to posts; that its Telegram channel didn’t allow comments; or the biggest red flag of all, the multiple reports of people being unable to sell their coins.

Despite the price action, trading volumes peaked on Friday at around $10m. The reason they fell over the weekend was that speculators couldn’t sell. Gizmodo was reporting it as an obvious scam on the Friday morning for that very reason.

You can check out of the Hotel California, but you can’t leave, to misquote the song. The same goes for scam coins – you can buy them, you can place sell orders, but you can’t sell them.

These scams work on decentralised exchanges by the perpetrators providing enough liquidity, usually in the form of ethereum, to give the impression that there is genuine trading volume. Others see the liquidity and participate, then gradually the scammers offload their coins.

At a certain point, comes the “rug pull”. They drain the exchange of liquidity and the victim is left holding the bag.

The website, the white paper and the social media channels have all now disappeared as well, along with the speculators’ money. Gizmodo estimates the scammers got away with around $3.38m. I can’t pretend to understand how that figure was arrived at, but you can learn more here. Total trading volumes were many times that.

Will this story stop the scams? Nope. There’ll be plenty more, and punters will fall for them. “It won’t happen to me” runs the thinking. “I’ll be able to sell before the top.” You won’t.

If it’s too good to be true, it isn’t true, runs the saying. No matter. The potential to transform your life, to turn eight grand into five billion is too big a lure for most of us. The easiest guy to scam is not necessarily the rich guy, it’s the guy who wants to get rich.

Heck, I’ve fallen for scams over the years. And, sadly, I’ll fall for them again. I still buy lottery tickets. If I knew what the next meme coin was going to be I’d buy it. Who doesn’t want to turn a grand into a million? Luckily, my finger is too off the pulse of meme coins.

Daylight Robbery – How Tax Shaped The Past And Will Change The Future is now out in paperback at Amazon and all good bookshops with the audiobook, read by Dominic, on Audible and elsewhere.

Dominic Frisby

Dominic Frisby (“mercurially witty” – the Spectator) is, we think, the world’s only financial writer and comedian. He is the author of the popular newsletter the Flying Frisby and is MoneyWeek’s main commentator on gold, commodities, currencies and cryptocurrencies. 

His books are Daylight Robbery - How Tax Changed our Past and Will Shape our Future; Bitcoin: the Future of Money? and Life After the State - Why We Don't Need Government. 

Dominic was educated at St Paul's School, Manchester University and the Webber-Douglas Academy Of Dramatic Art. You can follow him on X @dominicfrisby