Meme Stock's First Short Squeeze Scam Wasted the Prime Bear Trap Narrative

On September 2, on the Robinhood Chain, a token named JINQIAN achieved a market capitalization of over $70 million in just 1 hour.

JINQIAN, in Chinese Pinyin, means "money." It piggybacked on a Nasdaq-listed company called Farmmi, known for mushroom cultivation. Interestingly, Farmmi's annual report actually mentions a mushroom variety called Jinqian mushroom, known in the community as the "Money Mushroom."

Simultaneously, Farmmi's common stock on the Nasdaq, with the ticker symbol FAMI, experienced a surge of over 300% intraday, briefly touching near $0.4, with trading volume spiking to hundreds of millions of shares. A few days ago, a microcap company trading around $0.12 with a market cap of just over $4 million suddenly became the brightest star on the market.

On-chain, a coin named "FAMI" also followed the JINQIAN surge, pulling up the price and briefly exceeding $100 million.

The story begins two days ago.

A Good Narrative

On August 31, crypto trader Rune (@RuneCrypto_) tweeted that he had invested about $1.8 million in over-the-counter (OTC) trading to acquire a 37.4% stake in a low-market-cap Nasdaq-listed company. He provided specific numbers: a market capitalization of around $4.8 million, a share price of around $0.12, and a short interest of 92.3%. Almost the entire float of this stock had been borrowed for short selling.

His next plan was also straightforward: tokenize this stock on the Robinhood Chain, launch a meme coin paired with it, use on-chain funds to buy the underlying shares, and squeeze the shorts. Squeezing the shorts means forcing those who borrowed the stock to cover their short positions by buying back at the peak.

This story was inherently captivating. Squeezing shorts is a narrative deeply ingrained in Robinhood's ethos.

On January 28, 2021, GameStop touched $483 intraday, up from $18 a month earlier. Reddit retail traders turned a physical video game retailer into Wall Street's nightmare: short interest in the borrowed stock exceeded the float by over 100%. The short sellers anticipated bankruptcy, but instead, they faced a bloodbath. Keith Gill, known as Roaring Kitty online, turned his $53,000 investment into $48 million, proudly declaring, "I like the stock," on camera.

Therefore, when Rune's story emerged, all that remained was to see which company he chose because the community discovered that no Nasdaq stock could meet all the specific criteria he had laid out.

But when the mood is right, nothing else seems to matter.

On September 2nd, when the community discovered the peculiar FAMI and JINQIAN, several key elements quickly became apparent: Farmmi, with the Nasdaq ticker symbol FAMI, a company in the edible fungi business, and a product named JINQIANG Mushroom, with an extremely small market value. All the elements of a US stock market meme were in place, so let the frenzy begin. (For the logic behind US stock market memes, refer to "Understanding the Logic Behind US Stock Market Memes: Bringing the Squeeze to the Chain").

The emotions quickly took over.

On-chain FAMI saw a 10x increase in one hour. The trading volume rapidly exceeded $100 million. People rushed into the JINQIAN/FAMI liquidity pool: 4% transaction fee? No problem. Slippage? Irrelevant.

The underlying stock was also not left behind. The Nasdaq-listed FAMI surged over 300% intraday, reaching a high of $0.39–$0.47 at one point, with trading volume ballooning to hundreds of millions of shares. The on-chain FAMI reached a market cap of nearly $100 million, almost ten to twenty times the entire market cap of the underlying company. A mushroom company that usually generated little interest had a daily trading volume that surpassed the sum of its trading volumes over the past few years.

Why It Was a Scam

When things heated up, Rune came forward with a response.

He claimed he wasn't the one behind it. The acquisition statement stating "I acquired 37.4%" and "I planned to tokenize and short" was written and released by Claude at his behest. The person who actually minted the coins and provided liquidity on the chain was someone else who borrowed his idea.

As the frenzy subsided, some individuals decided to investigate the on-chain address where the coins were minted. The reality was far more precise than the story.

The on-chain FAMI contract was deployed on September 1st at 21:34 (UTC), and it was a newly minted coin created just the afternoon before.

Total token supply: 37,430,000 tokens. Interestingly, Farmmi's underlying stock also happened to have around 37.43 million shares outstanding. The numbers matched perfectly.

The first transaction by the deployer wasn't a buy order; it was minting: transferring 14,223,400 tokens from address zero to themselves. Let's do the math:

14,223,400 ÷ 37,430,000 ≈ 38.0%, which is essentially the same as Rune's claimed 37.4%.

Even the proportion of reserved chips was strictly scripted. The minters wanted everyone to believe: This is exactly how Rune operates.

But more important than authenticity is another fact: This gameplay was missing a key piece from the beginning.

Robinhood has a strict requirement for its stock tokens, clearly stated in the official documentation: Only the official contract address is recognized. If the names match, the codes match, but the contract addresses don't match, then it's not a Robinhood stock token. On-chain stock tokens can only be minted for purchase by authorized participants designated by Robinhood Assets (Jersey), backed by custodied stocks; a community-launched token of the same name doesn't count. Being able to trade the actual FAMI stock on the U.S. stock app is part of the brokerage business, completely separate from on-chain stock tokens.

The official asset list includes over 100 codes, such as CRM, JNJ, LLY, QCOM, but there's no FAMI or Farmmi listed.

In other words, Robinhood on-chain does not have an FAMI stock token. The skyrocketing FAMI is simply a namesake coin that has no relation to the stock; it was minted just on September 1st.

What does this mean? In the real U.S. stock meme gameplay, where a stock token is used as a pool, locked, and priced against it, the prerequisite is that the stock must first be on the official list and have an official stock token. FAMI is not on the list. There has never been an "FAMI stock token" on-chain. The FAMI that surged tenfold today is merely using the namesake code with nothing underlying it.

The chain of causation, from on-chain funds buying memes to the demand for tokenized stocks to the issuer shorting the actual stock on Nasdaq, only holds true when "the stock truly has an official stock token." FAMI is not on the list.

A good narrative makes a good story. Every term - the shorted small-cap stock, on-chain linkages, and shorting - touches a nerve with Robinhood retail investors.

Unfortunately, the best narrative attracted a wolf in the end.

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