The PEPE Coin Scandal: Unveiling the Shady Underbelly of a Meme Coin
By Noah Washington September 5, 2023
- PEPE coin, a meme coin recently launched on Binance, experienced a massive token theft that destabilized its market capitalization
- Three former founding members gained unauthorized access to the project's multi-signature wallet, leading to a substantial token drain and causing market turmoil
- Amidst panic selling and internal conflicts, remaining PEPE founders pivot towards decentralization, while "whales" see the dip as a buying opportunity
The cryptocurrency community was surprised by news surrounding PEPE coin, a meme token that was launched on Binance a few weeks ago. The PEPE coin X (formerly Twitter) account announced that a large number of tokens had been stolen, leading to a steep drop in the token's market value. This turn of events led to turmoil for PEPE coin holders who had previously been expecting positive price action.
According to a statement from the PEPE coin team, 16 trillion tokens were recently transferred to cryptocurrency exchanges. This flood of supply led to a dramatic drop in the PEPE token price, falling from a recent high to $0.00000082 on August 25th.
At the core of this scandal is the fact that three individuals previously connected to PEPE coin gained unauthorized access to the project's multi-signature (multi-sig) wallet. A multi-sig wallet requires multiple parties to sign transactions with their private keys before funds can be moved.
In the case of PEPE, the wallet was set up to need approval from 5 out of 8 authorized signers. However, the three individuals managed to gain access to enough private keys to sign transactions and drain the wallet of approximately 60% of its balance. The team is still investigating the root cause and how the private keys were compromised.
Community Response: Panic and Comparisons
The PEPE token theft and subsequent price collapse threw the PEPE community into disarray. Many investors panicked, leading to a frenzy of sell-offs in an attempt to salvage any remaining value. This reaction echoed previous scandals, with some drawing comparisons to the BASE platform that caused some investors to lose money.
The BASE incident involved two tokens, Pond0x (PNDX) and Bald (BALD), which were traded on the Base platform. PNDX prices crashed after a critical bug was discovered in its code, rendering the token worthless. Meanwhile, BALD's developer unexpectedly pulled all liquidity from the market, causing its value to freefall. Combined, the two token failures resulted in around $4 million in losses for BASE traders holding the tokens.
Much like the BASE investors, PEPE holders experienced heavy financial losses as the token's value evaporated overnight. The panic selling and loss of trust in PEPE mirrors the community's reaction after the BASE fraud. Both incidents highlight the risks involved with cryptocurrencies and the potential for fraud or technical issues to lead to sudden, catastrophic losses. While the full fallout from the PEPE theft remains unclear, the parallels to BASE signal that many investors will be left empty-handed, unable to recoup the value they held prior to the breach.
Official Announcement and Insider Motivations
"It appears that most/all of the tokens stolen from the multi-sig yesterday were quickly sold on OKX and Binance. The remaining 10 trillion tokens left in the multi-sig will be transferred out of the old multi-sig and into a new wallet where they will safely rest until a use or burn arises," noted on the official X account of PEPE.
The culprits were identified as former founding members of the PEPE team itself. This points to a simmering internal conflict that had apparently been unfolding behind closed doors for months prior.
Amidst the chaos, the remaining founder of PEPE sought to reassure the community. A commitment to decentralization was proclaimed as the new direction for PEPE. This shift is aimed at restoring faith in the project and distancing it from the actions of the rogue founding members.
Whales and the Hope of Redemption
In the wake of the scandal, the PEPE community is working to regain stability. Amidst falling prices, a small group of major token holders, nicknamed "PEPE whales," seized the opportunity to increase their holdings. One notable whale made waves by investing over half a million dollars to acquire 640 billion PEPE tokens, a move that shows faith in the cryptocurrency's potential to rebound. Though the coin's future remained uncertain, the whales' willingness to "buy the dip" sparked optimism within the community.
The PEPE team also admitted that the project had been conceived as a quick-money cash grab from the outset. The initial promises of innovation and community-driven growth were nothing more than a facade to lure in unsuspecting investors. The project developers were accused of planning a "rug pull" with PEPE. A rug pull is a type of scam in the crypto space where developers abandon a project and make off with investors' funds. It refers to pulling the rug out from under investors.
Lessons Learned and Lasting Impact
The recent situation with PEPE coin has sparked important conversations about the long-term viability of meme coins and pump-and-dump schemes in the cryptocurrency space. While some in the community have responded lightheartedly, accepting that quick profits were the likely motive, others have voiced concerns about the implications.
Looking ahead, PEPE coin's future remains uncertain. However, its story underscores the ongoing need for transparency, thoughtful regulation and cooperation - not just within individual projects but across the larger blockchain ecosystem. With care and collective wisdom, more equitable and sustainable models can emerge.