What is a cryptocurrency rug pull? How to avoid rug pull scams in the cryptocurrency space? Rug Pull is one of the most destructive scams in the cryptocurrency market, causing countless investors to suffer huge losses. However, by mastering key techniques to identify risks and establishing a rigorous investment strategy, the threats posed by rug pulls can be effectively reduced.
The cryptocurrency market has developed into a multi-trillion dollar field since the birth of Bitcoin, attracting countless investors. However, high returns come with high risks.
Scams are rampant, with the most notorious being 'Rug Pull'. These scams are common, and many investors pour significant amounts of money into seemingly promising projects, only to find that the development team has suddenly vanished, leading to a collapse in token prices and assets dropping to zero.
With the rapid development of decentralized finance (DeFi) and emerging blockchain projects, rug pull incidents are becoming increasingly complex and difficult to identify. As investors pursue high returns, how to protect their funds and avoid becoming the next victim is a challenge every cryptocurrency participant must face in 2025. Recognizing the signs of rug pull risks, understanding common scam tactics, and mastering effective hedging strategies will help reduce potential losses and ensure investment safety.
In rug pull incidents, project parties often create trust in a carefully designed manner to attract investors to buy tokens, then quickly empty liquidity or manipulate the market using technical means, causing investors' assets to instantly become worthless. Some projects even disguise themselves as partners of well-known companies or use false white papers and celebrity endorsements to create hype, misleading people into thinking this is a real opportunity. However, when the project party absconds with the money, investors realize they have been deceived.
Papers and celebrity endorsements create hype, leading people to mistakenly believe this is a genuine opportunity. However, when the project party runs away with the money, investors discover they have been duped.
Scams, and the decentralized nature of blockchain makes it often difficult to recover losses.
Key points of Rug Pull:
New label group Missing - Unlocked liquidity funds, the team can withdraw at any time and run away.
● Smart contract code contains malicious backdoors - the code may prohibit selling or allow the team to infinitely mint tokens. Anonymous teams cannot be tracked - scam projects often hide the identities of developers, making it impossible to hold them accountable after they run away. Exaggerated profit promises - attracting investors with extremely high returns, but in fact, it is a scam.
· Low community transparency - few project updates, communities filled with bots, and development teams not responding to queries.
Common characteristics of rug pulls
In 2025, as the Web3 and DeFi fields develop, the tactics of rug pull scams may become more subtle, but there will still be signs to follow. The most typical rug pull projects usually have the following characteristics:
First, the lack of a liquidity locking mechanism is a key warning sign. Many legitimate DeFi projects lock liquidity in smart contracts, ensuring that the team cannot withdraw funds at will. However, scam projects often circumvent this mechanism, allowing the team to withdraw all funds at any time, leading to market crashes. Investors should check whether liquidity is secured by locking mechanisms before participating in any new projects.
Secondly, the security of the smart contract's code is also an important evaluation criterion. Many rug pull projects include malicious code in their smart contracts, such as prohibiting investors from selling tokens or allowing developers to infinitely mint new coins. Investors can use open-source tools to check the smart contract code or look for reports from third-party auditing firms to ensure the project has no backdoor programs.
Anonymous teams are also a warning sign.
Moreover, anonymous teams are also a warning sign. While there are many anonymous founders in the cryptocurrency space (e.g., Satoshi Nakamoto), many rug pull projects exploit anonymity to hide their identities, making it impossible for investors to hold them accountable. Before investing, prioritize teams with transparent backgrounds and check their past blockchain records to assess credibility.
Extremely exaggerated profit promises are also typical scam tactics. When a project promises '100-fold returns' or 'risk-free high returns', it usually indicates that there are significant risks involved. High returns are typically accompanied by high risks, and investors should remain rational and avoid being misled by short-term profit temptations.
Community activity and project transparency can also help assess risk. Authentic blockchain projects usually have active communities, and development teams regularly update progress and respond to investors' questions. If a project's community is filled with bot accounts, the development team is unwilling to respond to inquiries, or suddenly stops updating after fundraising, it is likely a scam.
What is a rug pull scam?
Capital withdrawal refers to the developer or team withdrawing support for the project, rendering investors' tokens worthless or greatly reducing the token's value compared to the seemingly viable project.
Rug pulls typically follow a similar pattern: an individual or team hypes up a project or token to attract traders on decentralized exchanges (DEX), who buy tokens from the liquidity pool. These buyers exchange valuable tokens such as ETH or SOL for the newly launched tokens.
Then, as shown below, the project's liquidity is canceled, making trading difficult or even impossible. The project owner or team disappears with the funds.
In other cases, the team terminated support for the project, or the team missed key development milestones, leading to a price drop. The team might also sell off tokens, which can also lead to a price drop.
NFT rug pulls typically follow a familiar pattern. An NFT creator promotes a new NFT series extensively, attracting investors to join this exclusive ownership community. After the NFT minting (purchasing with ETH or other cryptocurrencies), the creator disappears with the money, and the community no longer exists. What remains is a questionable NFT with little value.
Comparison of soft pulls and hard pulls
Not all 'rug pulls' are malicious or premeditated scams, which is why there are distinctions between 'soft pulls' and 'hard pulls'. The severity of a rug pull can vary, with soft pulls potentially offering recovery opportunities or at least more time to exit positions before tokens become worthless.
Hard rug pulling, commonly referred to as 'rug pulling', is a premeditated malicious act. Developers, owners, or teams exploit investors' fear of missing out (FOMO) to defraud money from them.
What is a soft rug pull?
Soft pulls may involve deceptive practices, such as exaggerating expectations or making false promises. In other cases, the project may simply be poorly managed, leading to a loss of investor confidence and gradual attrition. Team members themselves may sell tokens while they still have value.
These types of 'rug pull' incidents often stem from initial good intentions but later go awry, leading to investor losses.
False promises in marketing: Unlike stocks, cryptocurrencies are largely unregulated, which opens the door for project teams or owners to make exaggerated promises about tokens or projects. Over time, it becomes increasingly evident that the project has failed to meet established goals, leading to token sell-offs.
· Incomplete roadmap delivery: A project roadmap allows investors to understand the planned content of the project, enabling informed decisions. However, the team may be unable or lack the motivation to deliver planned features or marketing activities that would add value to the token. Missing a milestone can lead to a loss of investor confidence and sell-off.
Team dumping excess tokens: Teams typically receive generous token allocations at launch. If the team sells large amounts of tokens to the market, the attractiveness of the chart diminishes, leading to a loss of momentum and sell-offs.
What is hard rug pulling?
Hard rug pull scams are the back-alley criminals of the cryptocurrency world, although they often appear promising at first. In hard rug pull frauds, project creators are entirely focused on defrauding money from investors in one or more ways.
For example, a new token at launch may have hardcoded restrictions, preventing sales or delaying sales except for whitelisted addresses. The result is an impressive chart that attracts new buyers. Before investors can sell time-restricted tokens, the creators will reclaim liquidity, halting trading entirely. The token becomes worthless.
Remove all liquidity: Tokens traded on DEX need liquidity pools to facilitate trading. The example above shows a case where liquidity was removed. Due to hardcoded cooldown periods, non-whitelisted traders cannot sell, so no one can provide liquidity. As a result, the token dies, and the money is gone.
● Copycat tokens: Multiple tokens may share the same code. This may indicate that one or more of these tokens are future hot tokens, as seen in the example above.
Exit scams: Exit scams usually involve initial coin offerings (ICOs) or presales, where project owners hype up the project to raise funds from investors. The project may not exist at all, or it may achieve some simple milestones to show progress to investors and continue to raise funds. Ultimately, project owners often disappear.
Common carpet pull patterns to avoid
Pump and dumps usually follow a similar pattern, giving investors a chance to avoid falling into traps. Beware of hype on social media platforms. It is also wise to avoid newly launched tokens until you have time to research the project, team, trading activities, and the tokens themselves.
The impact of hype train marketing and social media
Platforms like Twitter (X), Telegram, Discord, and Warpcast provide an online gathering place for cryptocurrency investors seeking community, and may even offer some alpha information on new opportunities. However, scammers also exploit these platforms to hype up projects and try to defraud investors.
When the possibility of obtaining hundreds of thousands or even millions of dollars in returns arises, well-funded social media marketing campaigns turn into nominal business expenses. Beware of promises of 100 times or higher returns. While some tokens can achieve this, cryptocurrencies make it easy for developers to create a new token that is unintentionally supported.
Silence from developers after launch
Look for official Telegram or Discord groups and understand the interaction within the groups. Specifically, check for updates from developers or the project team. Silence is not always golden. A lack of community engagement may be a significant signal. The developers may have abandoned the project or created community groups to attract early investors and build an appealing chart.
Pull liquidity and funds
DEX trading tokens require a liquidity pool, so even a rug pull requires a liquidity pool - until the liquidity is removed.
For example, a new token might launch with a small pool worth only a few thousand dollars. As traders buy the new token (often using ETH or SOL), the token's value continues to grow, and the liquidity pool expands accordingly. This makes the token appear more attractive, but it might just be a smokescreen.
Tokens in the pool are likely to be split equally between ETH and SOL. If the project owner withdraws the liquidity of the token, it often cannot recover in time. The liquidity pool owner will take away ETH or SOL, while the other tokens in the pool become worthless.
Look for tokens with locked liquidity. This means that the DEX pool cannot be closed immediately, as it uses a smart contract with a locking time.
Websites like Dexscreener and Dextools show whether liquidity is locked. The example above shows that the WIF/SOL pair locked $19 million in liquidity. This does not guarantee that WIF will rise, but it ensures the way trades are handled, whether buying or selling.
Notorious examples of rug pull scams
Let's take a look at some of the worst 'rug pull' phenomena visible across various fields in the cryptocurrency industry.
1. OneCoin
The largest cryptocurrency Ponzi scheme, OneCoin, raised $4 billion by promising cryptocurrency investment returns to investors and promoting the company as a legitimate business, defrauding billions.
Ruja Ignatova, the Bulgarian founder of OneCoin, vanished without a trace in October 2017 and is wanted by U.S. authorities for fraud and conspiracy. She is currently the only woman on the FBI's Ten Most Wanted Fugitives list and one of only 11 women to have appeared on that list. If convicted, she faces up to 20 years in prison.
According to court documents, she claimed OneCoin would become a 'Bitcoin killer', while the company's primary business was selling course materials, defrauding billions from victims she referred to as 'fools'. OneCoin's trading was not active, nor did it have a blockchain. Instead, the currency was based on a SQL server.
After Ignatova went missing, her brother Konstantin Ignatov took over control but was arrested in 2019 and ultimately confessed to fraud and money laundering.
2. Thodex
Thodex, founded in 2017, was a cryptocurrency exchange in Turkey that went missing in April 2021, with investors' funds worth over $2 billion. At that time, the now-defunct exchange's founder and CEO, Faruk Fatih Özer, claimed they had to stop trading due to a cyber attack, alleging that investors' funds were safe before disappearing.
In 2021, Turkey launched an investigation against Özer for suspected fraud and forming a criminal organization, arresting dozens of employees from Sodis and seizing the company's computers. The International Criminal Police Organization also issued a red notice, which means all police in the world were asked to find and arrest him.
In September 2022, Özer was arrested in the Albanian city of Vlore. According to blockchain analysis company Chainanalysis, approximately 90% of the total value lost due to rug pulls in 2021 can be attributed to this fraudulent centralized exchange.
According to local reports, the state attorney general has requested a sentence of 40,564 years in prison for all involved, including Özer, as the indictment includes over 2,000 plaintiffs.
3. AnubisDAO
This Dogecoin project raised $60 million in ETH (13,597 ETH) in exchange for the native ANKH token. Less than 24 hours after the project started, the funds and the investment pool were sent to another address and never recovered.
Due to the lack of liquidity for trading, the price of the ANKH token dropped to zero.
AnubisDAO claims to be a fork of OlympusDAO, which is a decentralized reserve currency backed by bond sales and liquidity providers. At launch, the team had only a Discord server and a now-defunct Twitter account, but no website or white paper, and the developers used pseudonyms.
"AnubisDAO should serve as a warning for investors evaluating similar opportunities. Chainalysis stated in its 2021 cryptocurrency crime report: 'The most important insight is to avoid new tokens that have not undergone code audits.'
4. Squid Game (SQUID) token
One of the worst scams in cryptocurrency is the Squid Game (SQUID) Web3 project, which was launched by an influencer in 2021 on the Binance Smart Chain and hyped through extensive media coverage. According to Solidus Labs, 12% of BNB Chain tokens are scams.
With the popularity of the Netflix series, the Squid Game token raised $3.3 million from investors. The developers then drained the liquidity pool of SQUID and absconded with users' funds.
Solidus Labs reported that the Squid Game token is the most famous example of a honeypot vulnerability, as it called external contracts in its deployment, making it appear as a rapidly growing commemorative coin to many users.
The project has a website, but it is filled with grammatical errors and anti-dumping mechanisms. A Twitch streamer captured this loophole live during a broadcast, which showed the token's market value plummeting from $2.2 trillion to nearly zero in an instant. As of the time of writing, the trading price of SQUID is $0.0096, down over 96% from its historical peak.
5. Mutant Ape Planet (MAP) NFTs
The Mutant Ape Planet (MAP) NFT series is a knockoff of the popular Mutant Ape Yacht Club (MAYC) NFT series. It was recently arrested and charged with fraud.
A 24-year-old French citizen residing in the UAE, Aurelien Michel, was detained after landing at New York's Kennedy Airport. According to the indictment, Michel and other unnamed defendants promoted their NFT project to potential buyers, promising that purchasing NFTs would yield 'rewards, lotteries, exclusive access to other cryptocurrency assets, and support from the community wallet', among other benefits. The developers also vaguely promised 'metaverse land', but these promises were never fulfilled.
It is alleged that after all the NFTs were sold, the defendant transferred the funds to other wallets controlled by Michelle, who admitted to the rug pulling in the community's Discord channel under the alias 'James'.
Renowned blockchain analyst ZachXBT stated that on-chain data indicates that Michel profited millions from several other similar fraud cases, such as Fashion Ape NFT and Crazy Camel.
How to avoid rug pull scams?
To avoid becoming a victim of a rug pull, investors should adopt a multi-layered risk assessment strategy. First, conduct thorough research on the project's background, including team members, past experiences, and partners. Legitimate projects typically have clear white papers and provide detailed technical and development plans, while scam projects are often filled with vague descriptions.
Secondly, use blockchain explorers to check the activity of the smart contract. For example, you can check if funds are heavily concentrated in the hands of a few, if there are a large number of unusual transactions, or if the development team has suddenly withdrawn a large amount of funds. These signs may indicate the risk of a rug pull.
Moreover, diversifying investments is also an effective way to reduce risk. Spreading funds across different projects instead of betting on a single high-risk token can reduce losses from rug pulls.
Additionally, stay vigilant and do not blindly trust online hype. Many rug pull projects use social media to create a FOMO (fear of missing out) environment, encouraging investors to buy in large amounts within a short time. If a project's promotional methods are overly aggressive without actual technical support, one should be cautious.
Conclusion of the rug pull scam
Rug Pull is one of the most destructive scams in the cryptocurrency market, causing countless investors to suffer huge losses. However, by mastering the key techniques to identify risks and establishing a rigorous investment strategy, the threats posed by rug pulls can be effectively reduced. In 2025, as the DeFi, GameFi, and Web3 sectors expand, new types of scams will emerge. Investors should remain rational, carefully assess each investment opportunity to truly achieve capital appreciation and avoid becoming the next victim of a rug pull.
This concludes the detailed introduction to what the cryptocurrency rug pull scam is and how to avoid it. Hope you all like it!
$BTC$ETH