I’ve been interested in the metaverse, this growing digital landscape. I happen to agree, as a graphic novelist I can tell you there’s tons of incredible storytelling and community building potential. Yet my background similarly predisposes me to be jittery over what could come in the dark, unseen shadows. The metaverse, with its promise of riches and anonymity, is becoming a Ponzi magnet, and your avatar's wallet is squarely in the crosshairs.

High Return, High Risk?

Think back to the dot-com boom. Remember the promises of overnight riches? The metaverse is that – a second life – all over again, but on steroids. The siren song of easy money, heightened by FOMO, is a dangerous mix. Individuals are investing serious cash into these digital domains, pursuing sky-high returns that are too good to be true. And guess what? They usually are.

What we’re finding are narratives of digital scarcity pushing the price of virtual land, NFTs, and secure boom spaces in-game assets to premium prices. It reminds me of the tulip mania! Individuals become caught in the frenzy, all believing that this time is truly different. They’re marketed to as if they’re early adopters, pioneers of a new financial landscape. Too frequently, they’re nothing more than checks in a snazzily disguised Ponzi scheme. 72% of crypto Ponzi schemes advertise fraudulent staking or yield farming schemes. Just like Bernie Madoff, but with avatars.

Anonymity Breeds Deception

The appeal of anonymity can be a double-edged sword. It unleashes innovation and promotes freedom of expression, yet it offers a perfect facade for fraudsters. 92% of rug pulls are done by anonymous devs!

And the danger is that when you go into the metaverse, your whole identity will be an avatar, a pseudonym, a shoestring, a collection of pixels. This creates a massive loophole that is near impossible for law enforcement to track to who is actually perpetrating these scams. Picture losing your entire life savings in a digital looney tunes land-rush, all directed by someone playing under the mask of a cartoon feline. You're not just dealing with financial loss; you're dealing with a profound sense of betrayal, a violation of trust in a space that's supposed to be about community.

  • The Problem: Anonymous developers
  • The Result: Rampant scams
  • The Solution: Decentralized Identity (DID) systems (but adoption is slow)

It is the Wild West – with blockchain. And like the Wild West, it could really use a little law and order.

Unintended Consequences Abound

As the metaverse’s explosive growth is leaving a regulatory vacuum, scammers are taking advantage of the opportunity with glee. The data speaks for itself: in 2024, $4.6 billion was lost to crypto rug pulls and Ponzi schemes. $4.6 BILLION! And that’s not Monopoly money either—those are real people’s livelihoods, unceremoniously wiped off the table.

Regulators are focused on catching-up. The scammers are 8 steps ahead. The pace of rug pulls is horrifying, as quick as 12 days on average. “Soft rug pulls” are becoming increasingly common. This very gradual and quiet depletion of liquidity renders them even more difficult to see. It’s a bit like watching your pension melt away, knowing there is nothing you can do to prevent it.

The US is the top target. 40% of Ponzi Scheme Losses are in the US!

We believe the metaverse can be an amazing place and a powerful force for good. Instead, it can—and must—become a dynamic public square for creativity, connection, and economic opportunity. Right now, it's a breeding ground for scams, preying on people's hopes and dreams.

Be skeptical. Do your research. Never invest more than you can afford to lose. And hold platforms accountable and demand better from the companies whose platforms you use. They have an ethical obligation to do more than protect their users—they must refrain from reaping profits simply from their users’ presence.

Trust is central to the future of the metaverse, and that’s why we need to establish a trust-first foundation. Until we address the dark side of avatar wallets, the metaverse will remain a Ponzi magnet, and we'll all be paying the price.