Description: Here we consider rug pull scams: what are these, how do they work, what are the red flags helping to detect them, and what to do if you have already been trapped in one? Find the answers here.

The Web3 world is chock-full of lucrative opportunities and game-changing innovations and draws both investors and developers who want to be in on the next big thing. But, there is a serious danger lurking alongside this innovation: rug pulls. These scams exploit investor trust and confidence and can end with the investor out of pocket and sorely disappointed.

In this article we are going to dissect what a rug pull is, explain the rug pull meaning, show you real examples of these, and provide you with actual actions you can take to prevent getting scammed by this type of fraud.

Key Takeaways

• A rug pull is a scam in which developers of a crypto project inflate the value of their token, dump it, or drain it of its liquidity and render the investors with tokens that are worth nothing.
• Rug pulls usually take one of these three forms: dumping the token, stealing liquidity, or creating the unsellable token.
• If you have been impacted by a rug pull, make sure to report it to local law enforcement and inform the community about it.

What Is a Rug Pull?

So, what is a rug pull in crypto? A rug pull is a form of scam in the cryptocurrency and NFT industry, where the project creators abruptly abandon it, stealing investors’ money. The word alludes to the suddenness of the process (the whole operation may happen even during one day).

Developers release a new cryptocurrency or NFT project, frequently making vague but tantalizing promises. The appeal of sky-high returns, shiny new technology, or fear of missing out tempts investors. Once they reach a certain amount of invested value, the developers rug-pull, remove the liquidity pool, pull all their tokens, and essentially run away with the money. Investors are now stuck with worthless ones or cannot sell their tokens, losing money in the process.

Rugpulls are especially prevalent in decentralized finance (DeFi) and NFT projects, where anonymity and lax regulation help scammers flourish.

Types of Rug Pulls in Crypto

There are several varieties of rug pulls, generally defined by the way they are executed. Here are their main types:

1. Liquidity theft (or exit scam). This is the most common one. Developers make a token, pair it with another valuable token (like ETH or USDT) in a liquidity pool (e.g., on Uniswap), and then sell or remove all the liquidity once enough people have bought this new token. That leaves buyers stuck, unable to sell, because there’s no one else left to buy the useless asset, and the price of the token collapses.
2. Minting/supply manipulation. Developers issue (or unlock) an enormous number of tokens in the dead of night after launch. Then they sell those into their market, driving down the price and leaving the project’s holders holding tons of worthless coins, for example, a token contract with an unexposed mint() function.
3. Honeypot appears to be just like any other common token, which people can easily buy. But its smart contract is encoded in a way that no one (except the developer) can sell or transfer out this token, effectively locking investors’ money. Read more about the honeypot scam here.
4. Soft rug pull. Rather than outright theft of liquidity, the team ceases working on the project after raising the money. They sell their tokens slowly while hyping the project and then vanish. This is subtler and more difficult to prove as a fraud, a “slow rug,” or abandonment.
5. NFT rug pull. In the NFT space, creators in effect sell NFTs that promise future utility, community, or development (like a game or metaverse). After they sell out, they delete the website, go dark on social media, and fail to deliver on promises.
6. Governance/Whale Attack. In one DeFi protocol, attackers (or insiders who own a majority of governance tokens) can propose to drain funds or take over control.

Key Red Flags to Spot Before Investing

The best defense is spotting a crypto rug pull before you come in. So, let us consider the basic redflags you should notice and how to spot a rug pull.

Unlimited Minting or Tax Whales

Some scam tokens have a hidden mint() function in their smart contracts. It enables developers to print (mint) an infinite number of tokens at any time, share them on the market, and kill the price. Whale perks, such as being able to dynamically set taxes/fees or set other people's balances, are layered onto contracts.

Therefore, check the following:

• Check in the contract for capping the supply variable (maxSupply).
• Check the code (with an auditor) for sneaky mint or burn functions, which may not be publicly visible when someone else does the same thing.
• See if there are crazy high transaction fees (“taxes”) on buys or sells that flow to the owner.

No Liquidity or Lockers on DEX

For tokens to be traded, they require liquidity pools on decentralized exchanges (such as Uniswap and PancakeSwap). In many rug pulls, the developers provide liquidity as a temporary measure, sit for buyers, and pull out, leaving everyone holding the bag.

So, here’s a list of things to check:

• Is the liquidity locked? Some projects use things like Unicrypt or Team Finance to lock liquidity for months/years.
• By looking into block explorers or tools (such as DexTools), you can quickly see if your liquidity is locked in a time-lock contract or if it is only owned by the deployer (big red flag).

Anonymous Team or No Audit Information

Some rug pulls are conducted by anonymous teams, having no names, pictures, or record. Although not all anonymizing acts are inherently bad (in the world of crypto, they’re privacy-friendly), when they are coupled with other dubious actions or facades, they’re definitely a red flag.

Thus, check these:

• Do they have LinkedIn, GitHub, or any kind of traceable profiles?

• Has the team already been doxxed?
• Have they delivered similar projects in the past?

No Smart Contract Audits

Audits also make sure that a smart contract does not contain malicious or vulnerable code. A lot of rug pulls bypass it or present fake audit reports.

Here’s what to look for:

• Has the code been audited by an independent company? (e.g., CertiK, PeckShield, Trail of Bits, Hacken, etc.)
• Is the audit itself public and auditable?
• Check if the contract code is verified on Etherscan or BSCScan; unverified contracts are more difficult to trust.

Step-By-Step Protection Guide

Here’s a step-by-step guide that you can apply, according to the above-mentioned points, that will help you to stay away from a ragpull:

Check Address & Ownership

Before investing, verify the token contract address, and don’t rely on the name. Many scammers create fake tokens with the same name & logo. Obtain the official contract address from the project homepage or reputable announcement channels. Paste it in Etherscan, BSCScan, or another blockchain explorer.

Then check the ownership. It’s risky if the contract owner has the power to control the token (e.g., mint more tokens, adjust fees, drain liquidity) at any time. Look to see that the contract is “locked” or the “ownership renounced.” 

Use Rug-Pull Sniper & Audit Tools

There are both free and paid solutions to analyze tokens and identify risks:

• Token Sniffer checks out some common scams.
• DexTools is used to look at liquidity, holders, and trends.
• GoPlus displays risks of the contract (minting, pausing, blacklists, etc.)

Seek out a public audit from a reputable firm (CertiK, PeckShield, etc.). Verify the audit is not a fake: scammers usually make up logos & reports. Even if audited, note that any audit is not a surefire thing, but it’s still better than nothing.

Engage with Community & Look for Feedback

If there is a big community, it’s often a good sign, since a healthy community is hard to fake; a fake or dead one is a red flag.

So, join their Discord, and Telegram, follow their X. Check if actual people (not just bots) are asking questions and receiving real answers. Be suspicious when moderators silence anyone who asks hard questions.

Find anything people have said about the project on Reddit, X, or other platforms. Search for the team: any background, real profiles, or previous successful projects?

Review Smart Contracts

If you are capable of reading the code (or hiring someone who can), look into the smart contract. Using the explorer (such as Etherscan/BscScan) check if the contract is verified (i.e., the code is public). Here are the elements of rug pulling you have to look for: 

• Hidden mint() or burn() functions.
• High or changeable taxes/fees.
• Ability for the owner to disable trading or blacklist wallets.
• Liquidity controls: Is liquidity recoverable?

If you don’t have a technical background, you can rely on tools for scanning the contract so you can use MythX tools or paste the code in Token Sniffer or GoPlus to get an automated analysis.

Real-World Rug Pull Examples

Rug pulls remain some of the most destructive scams in crypto, draining billions of dollars of investors’ funds every year. The number of incidents has come down, though losses soared to almost $6 billion in 2025, highlighting how such schemes are becoming more widespread and sophisticated.

Developers in rug pulls flee their projects and disappear with investors’ money, leaving behind worthless tokens. Here we take a look at two big rug pulls in crypto and how they work. For anyone who is moving through the crypto space, it’s important to have a handle on these scams.

Libra Pump and Dump

“Pump and dump” refers to a move to inflate the price of an asset (such as a cryptocurrency) by posting false information to attract buyers who then become victims when traders who spread the false information sell their holdings at a high price. Libra was built and manipulated by Kelsier Ventures owner Hayden Mark Davis. He and his company are accused of manipulating the market for  Libra by “aggressively marketing” the digital token in a way that inflated its price, selling their holdings as the price soared, and then allowing the currency to collapse while others incurred massive losses.

OneCoin

The whole saga of OneCoin remains as one of the biggest crypto scams in history. Its leader, Ruja Ignatova, disappeared in 2017 and remains on the FBI’s Most Wanted list. It promised to be a “Bitcoin killer” but functioned without a blockchain and was implemented on SQL servers. Victims from all over the world lost from $4 billion to $15 billion in MLM-style recruiting and phony instruction materials. Ignatova’s brother was arrested in 2018 and pleaded guilty to fraud. The scam was a serious blow to the early credibility of crypto.

What To Do If You Fall Into a Rug Pull

In case you have already faced a rug pull in crypto, you must act quickly to minimize your losses. Keep a record of everything that has happened, report to the police, seek legal advice, and warn the public.

Here's a more detailed breakdown:

• Secure remaining funds. If there is still a market willing to trade the token, even at low rates, sell it as soon as possible to limit your losses. Search for other possible vulnerabilities in your crypto exchange accounts or wallets and take precautions like changing passwords and activating two-factor authentication.
• Document everything. Gather any receipts, times, dates, amounts, wallet addresses, etc. Take screenshots of any interactions with the project team members: whitepaper, content on the website, and so on. Record the exact date and time you were rug pulled.
• Report the incident. If you suspect the crime, please contact your local police or appropriate law enforcement agency. Then report the scam to the appropriate regulatory bodies in your area. If the token was listed on an exchange, notify the exchange.
• Seek legal advice. Retain an attorney that focuses on crypto project scams or fraudulent schemes. They will tell you what the legal possibilities are, like what you can sue for and how to recover assets.
• Tax implications. While rug pulls don’t technically meet the definition of theft, if you recognize it and sell the worthless tokens, you might be able to claim a capital loss on your taxes.

The sooner you act, the greater are the chances that you can reduce losses and, in some cases, recover funds. This will be key to reporting the issue and going the legal route. Posting your scam experience will help other consumers from getting scammed.

Conclusion

So, we have considered what a rug pull is. While they may no longer be the most prevalent form of crypto scam, it’s a good reminder to remain wary of tokens that promise unattainable gains, particularly when they come after a spike in price.

If a project does not have any transparency, hasn't undergone verified audits, or sounds way too good to be true, it most likely is a scam.

Though this guide includes some of the most popular rug pull signals and advice on how to avoid rug pull crypto, scammers are inventive and continue to find new ways to trick investors. So, be cautious, do your own research, and don’t let social media hype impact your judgment.