Rug Pull

Another malicious maneuver seen in the crypto world is the Rug Pull. Rug Pull, which consists of the words "rug" meaning carpet in English and "pull" meaning pulling, is a scenario in which the rug is pulled from under the investors' feet and their feet are dragged. Rug Pull refers to crypto developers abandoning their projects and running away with investors' money.4 In this type of fraud, we witness a cryptocurrency being inflated too much from its value and abandoned by the fraudsters who created/controlled this cryptocurrency when investment suddenly arrives. The purpose of the Rug Pull is to drain all the money of investors who have made good faith investments in cryptocurrencies that have been speculated to "go into space" through various means. When the cryptocurrency reaches a certain price as a result of various inflations, the fraudsters transfer the entire capital out of the crypto ecosystem.5 The more subtle form of this fraud is called "Soft Rug". In this case, the same fraud is carried out over a longer period of time. To avoid worrying about a typical Rug Pull, scammers sell the cryptocurrency slowly, unobtrusively, “drip by drop,” so to speak, as the price rises. Often, the creators who set this trap create excitement in people and put them in a "FOMO" mood by marketing the relevant coin/token on Twitter, Telegram and similar social media platforms. In fact, before creating this false excitement, they try to establish investor confidence by adding a significant amount of liquidity to their pools.6

A Precedent Case in the Cryptocurrency World: SQUID Token

The most recent and striking example of Rug Pull is the SQUID Token fraud that took place in recent months. In Netflix's Korean series Squid Game, which was released in the autumn of 2021 and made a lot of noise, there is a high prize and contestants trying to reach this prize. There will be only one winner of the prize, and each contestant who loses will bring a future winner one step closer to their prize. This series made a splash all over the world, and with the subsequent release of SQUID Token, a situation similar to the movie occurred, and the only winner was the creator of SQUID; because the creator of SQUID disappeared, taking all the investors' money with him. Namely, SQUID made a big splash when it was released and sold out within 1 second on October 20, 2021, when it was put up for pre-sale.7 On October 28, its price increased by 2,400% in the last 24 hours, reaching $2.22, and its market capital exceeded $174 million. Subsequently, on November 1, as a result of the SQUID Token creators running away with the money, the price of the Token dropped from $2,861.80 to $0.0007 within minutes; Investors are left with SQUID Tokens that have no value. The total loss suffered by investors was determined as 2.5 million dollars.