LIBRA Meme Coin Scandal Shifts Scammers’ Tactics

In the fallout of the LIBRA meme coin scandal, where insiders had advanced knowledge of launch mechanics, the blockchain security firm CertiK uncovered a new breed of scammers targeting automated trading bots instead.

Speaking with Decrypt at Consensus in Hong Kong, CertiK’s Chief Security Officer Kang Li shared insights into how some smart contracts are being deliberately designed to target AI trading bots themselves.

> “It turns out the target they are going after are the AI trading bots,” said Li.

This insight follows Hayden Davis, the self-proclaimed “launch strategist” for LIBRA and other meme coins, who described such projects as a “zero-sum game” that benefits only a select few.

Davis stated, “Even at the top, all of it is extractive to some degree—none of it has value,” referring to the involvement of “professional snipers” in meme coin launches who execute trades before announcements are made publicly.

Smart Contract Sniping
Smart contract sniping is a method where bots monitor on-chain activity to detect newly launched tokens and execute trades ahead of human traders. These bots operate within on-chain infrastructure and are programmed to place trades as soon as liquidity is available.

Li explains that sophisticated scammers are designing fake tokens with hidden “backdoors” that appear safe to AI-powered trading bots. While these bots are effective at analyzing tokens for security vulnerabilities, scammers have created a bait-and-switch scheme.

When a token is launched, the scammers promote it in AI trading communities. Once they secure a few buys, they execute a rug pull.

Ongoing Delusions

Li challenges the perception that blockchain security isn’t essential for meme coins and pump-and-dump schemes. He argues that significant risks come from who controls the token, potential price manipulation, and the history of those involved.

These scams are happening on a “massive scale,” potentially resulting in losses reaching the “tens of millions of dollars,” according to Li, who adds that scammers are mostly unperturbed by the law, stating they “just keep killing” trading bots without a single large victim to target.

“Law enforcement and regulation, nobody cares about that,” Li emphasized.

While technical solutions to combat these scams exist, implementing them safely is challenging. Charlie Hu, BitLayer founder, noted in a separate interview that while there are anti-sniping solutions available that can block malicious actions in the smart contract layer, many teams choose not to employ them.

These solutions set parameters to prevent sniping, but the design of smart contracts can create loopholes. If there are no rigid controls over who can trade, sniping bots can exploit the gaps.

“If developers make it pure permissionless, you just let the scammers go through,” Hu concluded.

Edited by Sebastian Sinclair