A suspected scam involving a meme coin based on the hit Netflix show Squid Game has left the global cryptocurrency ecosystem shocked. In India, it has, once again, highlighted the need for regulation.

The Squid Game token experienced a meteoric rise soon after its launch a few weeks ago and a swift market crash last week saw investors lose millions of dollars.

Despite the industry’s efforts to educate crypto enthusiasts, many Indian investors burnt their fingers in the frenzy.

“I bought the SquidGame Token and it was the worst decision of my life…lost a ton of money,” an Indian investor who goes by the username Gamer Genie on Twitter told Quartz. He has lost around $11,500 (Rs 8.5 lakh).

The fiasco is not the first. It is unlikely to be the last either.

For instance, in September 2020, the creator of SushiSwap disappeared following a $13 million (Rs 96.6 crore) “rug pull” – when a token’s creators abruptly abandon it, exchanging many virtual coins for real-world cash.

This is why “do your own research” before investing is key.

“It is very important for investors to research new token projects before investing,” Kapil Rathi, CEO and founder of global cryptocurrency trading platform CrossTower said. “In one sense, we have innovation that we do not want to stifle, but, on the other hand, we also have negative use cases that could emerge if the country did not have a protection policy.”

What happened

The South Korean survival drama series Squid Game was trending in 94 countries when it was released on September 17 this year.

It inspired a “play to earn” cryptocurrency, where people bought tokens to use in online games and earned more tokens that could later be exchanged for other cryptocurrencies or national currencies.

The token’s now-defunct website was registered on October 12 and its whitepaper was released in the last week of October – although with numerous red flags, including grammatical and spelling errors.

Within a week of trading, the meme coin’s price surged to $2,861 from as little as $0.01. Concerns around its legitimacy emerged after investors noted that it could only be purchased, not sold.

“Anyone can spin up a token and liquidity pool, so it is a common risk for new projects run by anons (anonymous),” Patrick McCorry, CEO of PISA Research and former assistant professor in cryptocurrencies and security engineering at King’s College London, told Wired magazine.

On November 1, in a matter of a mere 15 minutes, the Squid Game token’s price nosedived to less than half a penny, according to cryptocurrency data website CoinMarketCap. The developers reportedly fled with $3 million (22 crore rupees) of investor proceeds.

The “rug pull” has kept Binance, the world’s largest cryptocurrency exchange, on its toes, given that the token’s protocol was developed on its decentralised platform.

“We are entering a period of peak speculation – people are looking for the next get-rich-quick scheme or 100X opportunity,” Binance CEO and co-founder Changpeng Zhao said in a blog. “The truth is, those 100X do not come along often. And when they do, they usually come with a ton of risk.”

Popularity in India

The Covid-19 pandemic turned online entertainment into a major draw, with South Korean shows zooming in popularity in India.

The fondness for Korean culture has become evident in millennials’ preferences in dressing, music, cuisine, language and beauty products.

Many Indian companies have since turned their focus on all things Korean. Squid Game provided an opportunity for many of them.

A Pune-based gaming developer, SuperGaming, even introduced a new game, Squid Royale Games, based on the Netflix show. It has already garnered 4,56,000 pre-registrations.

While the exact number of Indian investors in the Squid Game meme coin is unclear, the show’s popularity in the country and the exponential growth of the cryptocurrency community here does indicate a potent combination.

Unregulated market

A sixth of urban Indians invest in virtual tokens, according to a survey by consulting firm Kantar. While the government is inclined towards a ban, market participants have argued for regulations.

“The Indian government should collaborate with the crypto-industry and representative bodies to create a functional regulatory framework as well as consider international approaches to crypto-regulation – especially in terms of cross-border aspects,” Rathi of CrossTower said.

In the absence of any guidelines, the Internet and Mobile Association of India, in June, set up a formal board Blockchain and Crypto Assets Council to oversee the implementation of a self-regulatory code of conduct for member crypto exchanges.

Currently, all major crypto exchanges in India are members of the Blockchain and Crypto Assets Council.

A query to the Blockchain and Crypto Assets Council for details on existing regulatory compliance went unanswered.

Investors now keenly await the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021– also known as the Crypto Bill – that is expected to be taken up in the winter session of the Parliament.

This article first appeared on Quartz.