What Is Rug Pulling?

In the world of cryptocurrency and decentralized finance (DeFi), rug pulling is a type of scam where project developers suddenly withdraw all funds from their investors and abandon the project, leaving everyone else with worthless tokens.

Typically, a team will promote a new cryptocurrency project, build hype, and attract people to invest. Once enough capital is locked in, the creators drain the liquidity pools or sell off their large holdings, causing the token’s value to crash instantly. This results in massive financial losses for investors who trusted the project.

Rug pulls can happen in various ways — from fake DeFi platforms to manipulated NFT projects. They have become one of the most common risks in crypto markets, making it crucial for investors to carefully research projects before investing. Signs of a potential rug pull include anonymous teams, lack of transparent development, no code audits, and unrealistic promises.