What is a Rug Pull?
Rug Pull (translated from English as 'pulling the carpet out from under') is a form of fraud in cryptocurrencies and DeFi, where the project team suddenly disappears with investors' money. It is one of the most common and destructive types of scams in the crypto space.
This usually happens as follows:
1. A project is created with a beautiful website, token, and promises of huge returns.
2. Investors are attracted through marketing, and sometimes even with the help of fake 'influencers'.
3. When a sufficient amount is collected, the developers simply withdraw the liquidity and disappear.
Types of Rug Pull
1. Liquidity Rug Pull
The most common. Token creators add liquidity on a decentralized exchange, investors start buying the token, raising its price. Then developers take the liquidity — and the token becomes illiquid and worth almost nothing.
2. Dump after launch
Developers keep a huge portion of the tokens for themselves. After the price rises, they sell their tokens in bulk, causing a price crash.
3. Hidden access to the contract
The contract appears decentralized, but developers leave backdoors for themselves — hidden functions that allow, for example, to prohibit the sale of the token or to issue new tokens uncontrollably.
Loud examples of Rug Pull
Squid Game Token (SQUID)
The creators used the hype around the series. The token price soared by thousands of percent — and at one moment the developers withdrew over $3 million. Users could not sell the token due to an embedded sales prohibition.
AnubisDAO
They promised 'new DeFi', raised about $60 million in ETH in 20 hours and... disappeared.
Meerkat Finance
One of the first scams on Binance Smart Chain — disappeared with $31 million in March 2021.
Where did the name come from?
The idea of 'rug pull' is a metaphor. Imagine you are standing on a carpet, and it is suddenly yanked — you fall. The same goes for investors: money is invested, the project looks reliable, and suddenly — the floor disappears beneath them.
How not to get caught
1. Check the smart contract
If you are not a developer — use services like Token Sniffer, DeFiSafety, RugDoc.io.
2. Liquidity should be locked
Reliable projects lock liquidity for a year or more through platforms like Unicrypt or Team.finance.
3. Diversification
Do not invest large amounts in newly emerged projects.
4. Audit from a third-party company
The presence of an audit from reputable firms (Certik, PeckShield) reduces risks, although it does not eliminate them.
5. Team transparency
If the team is completely anonymous, and there is no information about them, this is a red flag.
What to do if you got caught?
Report in communities
Warn others, especially if the project has just started to scam.
Document everything
Take screenshots, record transactions, save addresses.
Contact law enforcement
Yes, it sounds useless, but there are cases when scammers can be identified.
Learn the lessons
The main thing is not to try to 'get back'. This will only increase losses.
Conclusion
Rug Pull is not just a scam, it is cold calculation. In the world of decentralization, the protection of investments lies primarily with the users themselves. Therefore, DYOR (Do Your Own Research) is not just a slogan, but a survival rule in crypto.
