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Yield farm offering one million percent APY turns out to be a fraud

By Paul Golden

Edited by Aaron Woolner

04:37, 28 April 2022

A hacker at work on a laptop
Yield farm offering one million percent APY turns out to be a fraud – Photo: Shutterstock

In early April, MaxAPY claimed it was transforming the decentralised finance sector with a yield farming protocol that aimed to offer holders the highest fixed and most sustainable APY. Instead it was a rug pull.

As a strategy, yield farming is not dissimilar to foreign currency carry trading where investors aim to lend currencies offering the highest returns and borrow those with the lowest interest rate. 

Yield farming is typically done via stablecoins such as USDT, DAI and USDC, or protocols linked to the Ethereum blockchain. MaxAPY’s backers did not state which token they were using for their project.

DAI to US dollar (DAI/USD)

Farmers will typically move their crypto from one liquidity pool or loan platform to another in search of the maximum annual percentage yield or APY, which will often require flirting with riskier pools.

MaxAPY aimed to do this by using a ‘unique auto staking and auto compounding mechanism’ through which token holders would earn rebase rewards as interest payments directly into their wallet while their tokens increase every three seconds.

MaxAPY holders were told that they would receive an annual compound interest rate of 960,000% for Year 1 without having to move their tokens out of their wallets.

XRP/USD

0.60 Price
-0.760% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 0.01168

BTC/USD

66,815.00 Price
-0.960% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 106.00

ETH/USD

3,492.04 Price
-1.060% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 6.00

SOL/USD

172.98 Price
-1.250% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 2.2652

But despite the developers saying they had ensured the safety of investors by subjecting the entire team to full scale know-your-customer verification on both Cyberscope and Pinksale, within less than three weeks it was reported that the project had been rug pulled.

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Ethereum to US dollar (ETH/USD)

According to Grayson, head of business development at automated yield farming protocol Weave, inflated APY’s are a key sign of risk for potential yield farmers who aid that any project claiming returns of triple digits or higher was a potential risk. 

The backers of MaxAPY said its returns were a function of an: “Auto-Stake feature is a simple yet cutting-edge feature called Buy-Stake-Hold-Earn that offers $MaxAPY holders the ultimate ease of use. By simply purchasing a $MaxAPY token and holding it in your wallet, you will receive rebase rewards as interest payments straight to your wallet as your tokens increase every 3 seconds.”

 But instead of being based on cutting edge tokenomics MaxAPY simply recycled the millenia old tactic of using greed to defraud the unwary.

Markets in this article

DAI/USD
DAI/USD
1.0247 USD
0 0.000%
DAI/USD
DAI/USD
1.0247 USD
0 0.000%
DAI/USD
DAI/USD
1.0247 USD
0 0.000%
ETH/USD
Ethereum / USD
3492.04 USD
-37.47 -1.060%

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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