Rug Pull

A rug pull is the crypto version of taking the money and running. Developers launch a token, promote it to attract buyers, and then remove the liquidity, sell their large holdings all at once, or disable selling through a hidden contract function. The token price collapses to near zero and the creators disappear, often having earned anywhere from thousands to tens of millions of dollars.

Rug pulls are most common among memecoins and new DeFi projects on chains where launching a token is cheap and anonymous. Warning signs include an anonymous team, a very recent launch, most of the supply held by a few wallets, liquidity that is not locked, a contract that is not verified or has owner-only functions, and heavy promotion by paid influencers.

Tools that scan contracts for honeypot code and check liquidity locks can catch some rug pulls, but not all. A slower variant, sometimes called a soft rug, involves the team gradually selling and quietly abandoning development over months. The most reliable defense is to treat any newly launched token as potentially a total loss.