Key points

  • Arug pull is a scam where the team of a crypto projectabandons andleaves with the money, leaving a worthless token.

  • Common methods:drain liquidity,insert malicious code in the smart contract, ordisappear purely and simply.

  • Warning signs:anonymous team,unaudited code,unrealistic promises,liquidity that can be withdrawn at any time.

  • Your best protection:DYOR (Do Your Own Research) andsystematic prudence.


Introduction

The scenario is known: a new token arrives, everyone is talking about it, the price explodes… then everything collapses. Site offline, social networks silent, and investors stuck with tokens that are worthless.

It's a rug pull. This scam has cost the market billions, especially during the DeFi boom. Here's what it is, how it works, and how to protect yourself from it.


Definition: the rug pull, in one sentence

A rug pull occurs when the creators abruptly withdraw liquidity or abandon the project, preventing investors from trading their tokens and rendering their holdings virtually worthless.

It's not just pump-and-dump: we often see technical manipulation (backdoors in smart contracts, aggressive control of supply). The rise of DEXs in 2020 has facilitated these scams: launching a token is quick, inexpensive and poorly regulated.


How rug pulls unfold

1) Liquidity pool drain

DEXs use liquidity pools to enable trades. The typical scheme:

  • The devs launch a token andpair it with a known asset (ETH, USDT) in a pool.

  • The first buyers arrive, theprice rises, thevalue of the pool too.

  • When the pool is well filled, the devswithdraw their share of liquidity.

  • Theprice collapses almost to zero and buyers are stuck.

This is the most frequent case, and it can happen within hours or days after launch.

2) Trapped smart contracts

Sometimes, the scam is coded from the start. Hidden functions can allow to:

  • Create tokens endlessly, saturating the market.

  • Prevent resale by users (honeypot).

  • Transfer tokens from wallets without authorization.


Without a trustworthy third-party audit, these traps are almost undetectable for the average investor.

3) Social manipulation

Not all rug pulls are technical. Some play on the psychological:

  • Buzz on social networks,influencers as reinforcements,community engaged.

  • Once enough money is raised, the teamdisappears with the cash.

  • Sites, channels and liquidity evaporateovernight.


Warning signs to watch out for

  • Anonymous team: no verifiable identity, no credible history.

  • No audit: smart contract not verified, possible vulnerabilities.

  • Unlocked liquidity: it can bewithdrawn at any time.

  • Unrealistic promises: « guaranteed profits »,extravagant returns without solid proof.


How to protect yourself (practical method)

Do Your Own Research (DYOR)

  • Read thewhite paper.

  • Analyze thetokenomics (supply, distribution, lockups).

  • Checkon-chain with tools likeEtherscan orSolscan.

Check liquidity locks

  • Make sure the liquidity islocked for a significant duration viareputable third parties.

Demand quality audits

  • Check that the security audits come fromrecognized companies and that they arerecent.

Prefer trusted platforms

  • Use exchanges and launchpads withrigorous verification processes, for exampleBinance Launchpool.


Conclusion

Rug pulls represent one of the major risks of the crypto market. Many projects are serious, but the lack of regulation leaves room for bad actors.

By combining in-depth research, caution and good tools, you greatly reduce the probability of getting trapped.

In crypto, knowledge is your best investment — and your best defense.