What is a rug pull?
One of the typical crypto scams is a rug pull: the creators of the project promote it, collect funds from investors, and then suddenly disappear with the money. The term comes from the English phrase pull the rug out (from under someone’s feet) — "to pull the carpet from under someone’s feet." A rug pull is defined as a crypto scam in which the project team unexpectedly leaves and takes all the funds invested by users with them — explains Fork Log.
Types of rug pulls: technical and economic
Technical rug pulls are carried out through hidden functions of the smart contract. Fraudsters can, for example, make it impossible to sell tokens, conduct hidden minting (invisible to users, mining additional coins by developers) or add secret commissions for sales.
Economic rug pulls occur without changes to the code. The most common variant is liquidity withdrawal: the fraudster transfers all the liquidity from the pool on a decentralized exchange to themselves, causing the token's price to fall due to a lack of market.
Another option is the classic pump-and-dump. The creators of the token retain a large share of the issuance, drive the price to a peak, and then instantly dump their coins, crashing the value for others.
Economic schemes can also involve manipulations with tokenomics, for example, hidden unlocking of a large emission or opaque inflation rules that allow for the theft of investments later.
Known examples of rug pulls
Squid Game (SQUID). A meme coin from 2021, named after the series. When the price peaked, the creators simultaneously sold their tokens and locked the ability for others to sell. The price fell almost to zero, and investors lost significant funds.
AnubisDAO (ANKH). In August 2021, this decentralized fund raised about $60 million in ETH, promising token holders high returns. However, shortly after raising funds, the organizers withdrew all liquidity and disappeared with the investments. The community noticed that the project’s pages disappeared and the developers stopped responding — a classic exit scam.
Mutant Ape Planet (MAP). In 2022, French developer Aurélien Michel raised about $2.9 million from investors, offering them "special rewards" for purchased NFTs. Then he disappeared with the money. A criminal case was opened against Michel in the USA.
Evolved Apes. In 2021, the project promised to create a video game based on NFTs, raising 798 ETH (~$3 million) in a presale. Soon, the anonymous developer disappeared, and the project’s website stopped working.
Signs of a potential rug pull
Anonymity of the team. If the creators and leaders of the project do not disclose their names or hide their past (no real photos, social media, etc.), this is a reason to be cautious. Reliable projects are usually open about their team.
Unrealistic promises of profit. "Guaranteed returns" in a short period almost always indicate a scam. Such projects do this to quickly attract as many investors as possible.
Lack of documentation and specifics. The absence of technical documentation and vague project goals is a red flag.
Lack of smart contract audit. Reliable projects usually have published audit reports or security certificates. The absence of an audit increases the risk of hidden backdoors.
Lack of vesting. Genuine startups often lock liquidity (leave it in the smart contract for a certain period) so that developers cannot withdraw funds at their own discretion.
Tokenomics issues. Study the distribution of tokens. A large share held by founders (without phased unlocking), unjustifiably small total capital, or unlimited token issuance — all of this may indicate future manipulation of the price.
Slow changes in the rate. A sharp and rapid increase in the rate of a new token without an apparent reason (or vice versa, a sudden anomaly) often indicates manipulation. Also check the number of wallets holding tokens — if there are very few, the rate can be easily broken with a small trading volume.
Before deciding on a project, use services for automatic contract verification (for example, TokenSniffer, RugCheck, DEXTools). They help identify hidden functions or suspicious patterns in the project’s code.
What to do if you have become a victim of a rug pull
Unfortunately, it is nearly impossible to recover invested funds, but there are several steps that can help minimize losses and receive support:
Try to sell the remainder. If after the attack you still have tokens and their price has not dropped to zero, sell immediately — even for a pittance. This way, you can lock in the loss and have documentary evidence of the losses (this is important, especially for accounting or tax reporting).
Contact the platform or exchange. If you purchased the token through a certain DEX or aggregator, try reporting the problem to the technical support of that platform. There have been cases (for example, with the SolPad project) where the exchange or administrators returned part of the lost funds to the victims.
Seek community support. Join chats and forums where this scam is discussed. They may advise you on what to do and inform you about created initiatives or open investigations. In some cases, law enforcement has gathered with investors for joint actions. Do not publicly disclose personal information, but it is useful to coordinate with other victims.
Do not try to "recover" losses in subsequent quick speculations — this threatens even greater losses. It’s better to analyze your mistakes in detail: ask yourself what scam signals you ignored and be especially cautious with similar projects in the future.
The best way to avoid a rug pull is to conduct your own research (DYOR, Do Your Own Research) and use proven security practices. Before any investment, it is worth thoroughly studying the project, reading reviews, reviewing contract transactions on the blockchain, and paying attention to the factors mentioned above. If an offer sounds too good to be true, it is almost certainly a scam.