Ross Ulbricht Lost $12M on Pump and Dump Coin Sent to Him

Ross Ulbricht, or someone with access to his wallets, just accidentally nuked the price of a pumpfun coin sent to him while trying to provide liquidity on Raydium.

A series of technical errors in cryptocurrency trading led to a $12 million loss for wallets linked to former Silk Road founder Ross Ulbricht, according to Arkham Intelligence.

The wallets, which were verified by the crypto analysis firm as being listed on the FreeRoss.org donation site, initially held 50% of the total supply of ROSS tokens.

These tokens were created as a show of support for Ulbricht following his release from prison, where he had served 11 years for money laundering and drug trafficking conspiracies.

The first error occurred when the wallet controller attempted to provide liquidity on the Raydium platform. Instead of creating a Concentrated Liquidity Market Maker (CLMM) pool, which allows traders to set specific prices, they mistakenly set up a Constant-Product Market Maker (CPMM) pool.

This initial mistake resulted in approximately 5% of the ROSS token supply being made available at prices far below market value. A Maximal Extractable Value (MEV) bot quickly identified the opportunity and purchased 398.6 million tokens, worth about $1.5 million at regular market prices, for just $556.

The situation worsened when the wallet controller made a second attempt to add single-sided liquidity. This subsequent error led to roughly 35% more of the total ROSS supply being sold at unfavorable prices. The same MEV bot capitalized on this mistake, selling the acquired tokens for 2,669 SOL (approximately $643,000).

The combined errors resulted in a dramatic 90% price drop for the ROSS token, with values falling from $0.039 SOL to $0.0036 SOL per token within just two hours.

The trading volume for ROSS tokens showed increased activity following the incident, reaching $508,270 after a 24% surge in trading activity. This suggests ongoing market interest despite the price volatility.

Currently, the Ulbricht-linked wallets retain approximately 10% of the total ROSS token supply, valued at around $200,000. This represents a substantial decrease from their initial 50% holding.

The ROSS token has shown remarkable recovery since the incident. Within 24 hours of the price crash, the token experienced a 735% increase in value, reaching a trading price of $0.0104.

The trading volume has also expanded considerably, reaching $14.8 million as investors responded to the market movement.

The MEV bot’s successful exploitation of the situation demonstrates the automated nature of cryptocurrency markets, where programs constantly scan for trading opportunities and can execute transactions instantly when they identify pricing discrepancies.

This incident highlights the technical complexities involved in cryptocurrency trading, particularly in managing liquidity pools and understanding different market-making mechanisms.

The error occurred specifically on the Raydium platform, a decentralized exchange operating on the Solana blockchain, which offers different types of liquidity pools for traders.

The mistake shows how critical it is to understand the distinction between different types of liquidity pools – CPMM and CLMM – as they operate under different pricing mechanisms and can lead to vastly different trading outcomes.

The incident has drawn attention from the cryptocurrency community, serving as a reminder of the importance of technical knowledge in digital asset trading.