The anonymity of blockchain technology, weak regulation of cryptocurrencies, and a low entry barrier make the crypto market attractive not only to investors but also to malicious actors. There are dozens of ways to steal digital assets, and a rug pull is one of the simplest and most effective.
According to the analytics company Chainalysis, losses from rug pulls in 2025 alone amounted to between $14 and $17 billion.
What is a rug pull?
A rug pull (literally “pulling the rug out”) is a fraudulent scheme in which investors are deliberately misled into investing in a crypto project, after which its creators disappear along with the funds. The name reflects the essence of what happens: the “rug is literally pulled out from under investors’ feet.”
A typical rug pull scenario looks like this:
Scammers launch a crypto project and issue their own token.
The team actively promotes the token through social media, advertising, and influencers.
After attracting significant investment, the developers shut down the project, deleted the website and accounts, leaving investors with worthless tokens — in other words, they executed a rug pull.
Soft and hard rug pulls
In some cases, scammers do not withdraw funds all at once but withdraw them gradually to avoid suspicion and continue attracting new investors. In this regard, two types are distinguished:
Hard rug pull — a sudden disappearance of the team and liquidity.
Soft rug pull — a phased withdrawal of funds.
Rug pulls most often occur in the DeFi* sector and affect tokens, NFTs*, and memecoins*.
* DeFi (Decentralized Finance) — an ecosystem of financial services and applications based on blockchain technology that operate without traditional intermediaries (banks and payment systems). DeFi projects use smart contracts and allow users to perform operations such as exchanging assets, lending, staking to earn, and managing liquidity.
* NFT (Non-Fungible Token) — a unique digital asset on the blockchain that confirms ownership of a specific object: an image, video, music, in-game item, or other digital content. Unlike regular tokens, NFTs are non-interchangeable and have unique characteristics.
* Memecoins — cryptocurrencies created based on internet memes, popular images, or trends. As a rule, such tokens lack independent technological or economic value, and their prices are driven by hype, crypto community activity, and speculative demand, making memecoins particularly vulnerable to rug pulls and sharp price crashes.
The absence of KYC* procedures in DeFi projects significantly complicates the identification of malicious actors who carried out a rug pull. At the same time, services for tracking down such scammers are pretty expensive — their costs can exceed $10,000, making fund recovery economically impractical for damages of up to $15,000.
* KYC (Know Your Customer) — a set of user identification procedures involving the collection and verification of personal data. Financial and crypto platforms use KYC to increase transparency and prevent fraud, money laundering, and the financing of illegal activities.
Examples of the most high-profile rug pulls
OneCoin (2017) — a pseudo-cryptocurrency project operating as a Ponzi scheme*. Its founder stole about $4 billion and disappeared. OneCoin is considered one of the first and largest rug pulls in the history of the crypto industry.
BitConnect (2018) — a project with the BCC token that ranked in the top 10 on CoinMarketCap. It later turned out to be a rug pull that brought its organizers about $1.1 billion in illegal profit.
SHARPEI (2024) — a memecoin promoted by well-known bloggers. As a result of the rug pull, at least $3.4 million was withdrawn from liquidity pools.
ZKasino (2024) — a gaming platform in the zkSync ecosystem. Following financial difficulties, the team disappeared with investor assets valued at about $33 million.
Aqua (2025) — a project positioned as a trading infrastructure but ultimately revealed to be a rug pull, with damages of about $4.5 million in SOL.
* Ponzi scheme — a fraudulent financial model in which payouts to early participants are made using funds from new investors rather than from real profits or a functioning business. Such a scheme requires a constant inflow of new investments and inevitably collapses when the inflow stops, leaving most participants with financial losses.
How to identify a rug pull: key signs
The main danger of a rug pull lies in the fact that a fraudulent project is not always easy to distinguish from a legitimate one. Nevertheless, several signs help reduce the risk of losing funds.
In-depth project analysis (DYOR)
In the crypto environment, the principle of Do Your Own Research (DYOR)* is widely used. Before investing in a new crypto project, it is worth paying attention to the following points:
who is behind the project and whether the team has a successful track record;
developer activity on GitHub and professional profiles on LinkedIn;
the presence of reputable partners;
the content of the whitepaper* and roadmap — vague wording and a lack of specifics are a warning sign;
the quality of communication with the community and the level of audience engagement;
the project’s goals, value proposition, and development plans;
information about listings and mentions in the media and niche blogs.
* DYOR (Do Your Own Research) — a principle of responsible investing in the crypto environment, according to which a user independently analyzes a project before investing funds. DYOR includes studying the team, technology, tokenomics, roadmap, reputation, on-chain metrics, and risks, without unquestioningly trusting advertising, influencers, or public opinion.
* Whitepaper — an official technical and economic document of a crypto project that describes its concept, goals, architecture, operating mechanisms, tokenomics, use cases for the token, and development plan.
It is important to remember that even influencers may promote questionable projects without realizing it. In addition, a listing on CoinMarketCap does not guarantee safety — a clear example is the SQUID token associated with the TV series “Squid Game.”
It should also be noted that not every rug pull is initially intended as fraud: sometimes a team resorts to it amid the collapse of a project. Therefore, it is helpful to regularly monitor project metrics using analytical platforms.
If a decision is nevertheless made to invest in a high-risk project, it is worth investing only an amount whose loss will not be critical.
Smart contract verification
According to Solidus Labs, about 75% of fraudulent projects lacked smart contract audits. At this stage alone, it is possible to identify dangerous functions — for example, the inability to sell a token.
Specialized services are used to analyze smart contracts, allowing the detection of rug pull indicators, the presence of honeypot mechanics*, liquidity locks*, and protection against MEV attacks*.
* Honeypot mechanic — fraudulent logic in a smart contract in which buying a token is technically possible, but selling it is either completely blocked or accompanied by hidden restrictions and fees. As a result, investors can purchase the asset but cannot withdraw funds, making honeypots a form of rug pull.
* Liquidity lock — an investor protection mechanism in which liquidity tokens (LP tokens), confirming a share of funds in a pool, are temporarily or permanently locked in a smart contract. This limits the project team’s ability to withdraw liquidity instantly and reduces the risk of a sharp token price collapse.
* MEV attacks (Maximal/Miner Extractable Value) — a type of abuse in blockchain networks in which validators, miners, or automated bots manipulate transaction ordering within blocks to extract additional profit. The lack of protection against MEV attacks can result in financial losses for users and reduced project security.
On-chain analysis
When analyzing a smart contract, additional factors can indicate a possible rug pull. In particular, using blockchain explorers such as Etherscan or Solscan, it is possible to assess token distribution and determine what share is concentrated in the project team’s wallets. If this figure exceeds 80%, developers retain the ability to massively sell assets, which may lead to a sharp drop in the token price.
More advanced on-chain analysis* is conducted using specialized analytical platforms, including Dune Analytics and Nansen, which allow tracking the behavior of large holders and capital flows. The Arkham platform uses AI tools to accelerate the detection of suspicious activity, while services such as DexScreener help analyze a project’stokenomics* — one of the key parameters when assessing rug pull risk.
* On-chain analysis — a method of analyzing blockchain data recorded directly on the blockchain. On-chain analysis is based on the study of transactions, wallet balances, token distribution, and network participant activity. It allows the identification of large-holder behavior, liquidity movements, and suspicious actions that may indicate the preparation or execution of a rug pull.
* Tokenomics — the economic model of a crypto project describing the issuance, distribution, circulation, and use of tokens. Tokenomics includes parameters such as total supply, emission, distribution between the team and investors, burn mechanisms, incentives for holders, and the impact of these factors on asset price. Weak or non-transparent tokenomics increase the risk of a rug pull.
Exaggerated promises and aggressive marketing
Guaranteed profits are one of the most obvious red flags. Scammers often use FOMO* tactics, convincing investors to act immediately so as not to “miss out on the opportunity.”
Aggressive advertising that promises growth of hundreds or thousands of percent is also characteristic of rug pull projects. Experts recommend avoiding such initiatives and treating them with maximum caution.
* FOMO (Fear of Missing Out) — a psychological effect and marketing tactic in which investors are pushed into hasty decisions by creating a sense of urgency and scarcity. In crypto projects, FOMO is often used to spur rapid entry into an asset without a thorough risk analysis and is frequently employed in fraudulent schemes, including rug pulls.