Rug pull

A rug pull is a scam where the creators of a crypto project collect buyers' money, then pull the liquidity or dump their own tokens and disappear.

How it works

The name means pulling the rug out from under someone's feet. A team launches a token, hypes it on social media, and once buyers have put money in, the team takes it. The token's price drops close to zero and there is no one left to sell to.

The most common version is on a DEX (decentralised exchange): the creators put their token and, for example, ETH into a liquidity pool, then withdraw all the ETH. Other versions: the team dumps a huge supply of its own tokens, or the smart contract hides a rule that blocks everyone except the creators from selling (a honeypot).

Warning signs: an anonymous team, promises of guaranteed returns, "buy now" pressure, unlocked liquidity, a large share of tokens held by a few wallets and no independent audit of the contract. No single sign proves anything, but several together are a strong reason to stay out.

Example with numbers 1

A new meme token: the pool holds 50 ETH plus the project's tokens. Over three days, buyers add another 200 ETH. The creators withdraw all 250 ETH from the pool, the token drops 99% and the project's social accounts vanish.

Example with numbers 2

You buy $300 of a token and watch it rise to $1,000, but when you try to sell, the transaction fails. The contract blocks selling for ordinary addresses: it is a honeypot, and the money cannot be recovered.

Common mistake

The main mistake is buying a new token because the price is pumping and social media is loud, without checking who issued it or whether you can even sell it. Before buying, check whether the liquidity is locked and for how long, how tokens are spread across wallets and whether the contract has been audited. Only put in an amount you are ready to lose completely, because with these projects that is a real outcome.

Questions and answers

What is a rug pull in simple terms?

It is when a token's creators collect buyers' money and run off with it. After that, the token is worth almost nothing.

How can I spot a rug pull in advance?

Be careful if the team is anonymous, returns are "guaranteed", the liquidity is not locked and most tokens sit in a few wallets. Check whether the token can actually be sold.

Can I get my money back after a rug pull?

Almost never: blockchain transfers are irreversible and the creators are usually anonymous. Reporting to the police sometimes helps if real people can be identified, but do not count on recovery.

Rug pull

How it works

Questions and answers

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