Rugpull in the crypto world: the perfect theft that changes face every day

Introduction: when hype becomes a nightmare

In the crypto industry, scam scenarios repeat with alarming frequency. A new project attracts attention, its value skyrockets, then suddenly disappears into thin air. The website vanishes, social media go dark, and investors are left with worthless tokens. This phenomenon is known as a rugpull and is responsible for huge losses in the sector. It’s not just a market crash, but a deliberate strategy orchestrated by developers to seize others’ funds.

Understanding rugpull: definition and mechanics of the scam

What happens in a rugpull?

A rugpull is essentially a planned fraud where the creators of a token suddenly withdraw liquidity from pools or completely abandon the project, leaving investors with valueless assets. The dynamics are simple but devastating: investors are lured by enticing promises, they send their money, then the promoters disappear.

Although rugpulls resemble traditional pump-and-dump schemes, they are often more sophisticated, involving complex manipulations of smart contracts and strategic draining of liquidity pools. The rise of these scams coincided with the explosion of decentralized finance (DeFi) in 2020, when creating and launching tokens on decentralized exchanges (DEX) became a quick, easy, and virtually unregulated process. In an environment with few safeguards, malicious actors found fertile ground to exploit small investors.

The three faces of rugpull: how scammers operate

The technical strategy: withdrawing from the liquidity pool

On decentralized exchanges like Uniswap or PancakeSwap, tokens require liquidity pools so traders can swap them without intermediaries. Here’s how the simplest rugpull works:

A team launches a new token and adds it to a liquidity pool, usually paired with ETH or USDT. Initial investors buy, driving up the price and increasing the pool size. As investments grow, the pool accumulates significant amounts of valuable cryptocurrencies.

Subsequently, without warning, the developers withdraw all (or nearly all) of the liquidity they originally provided. The market crashes instantly, and the token’s price plummets toward zero. This type of rugpull is the most common and can conclude within hours or days of launch.

The hidden strategy: malicious smart contract

A more sophisticated rugpull is embedded directly into the project’s code from the start. Instead of a sudden exit, the scam lurks silently. Developers insert functions into the smart contract that allow them to:

• Generate unlimited tokens, flooding the market and crashing the price
• Block users from selling via contract honeypot, mechanisms that allow buying but prevent selling, turning tokens into useless assets
• Withdraw tokens directly from users’ wallets without consent

These scams are extremely difficult to detect without a thorough technical audit. Even more concerning: some honeypot tokens are labeled as “verified” to appear safe, while malicious code remains hidden under layers of complex logic or activates only after enough people have invested.

The invisible strategy: social rugpull

Not all rugpulls require advanced technical skills. Many rely solely on trust, and this is precisely what makes them deadly. These schemes start with a project generating excitement through social channels, building a community, and gaining mentions from influencers. Everything seems legitimate: token launches, NFTs, investor interest.

Once the number of investors is sufficient, the team vanishes. Social channels, the website, and wallets are emptied simultaneously. If the project creators maintain full control over the token supply, this type of rugpull can also occur on vulnerable launchpads or centralized platforms. At its core, it’s psychological manipulation and empty promises.

Recognizing warning signs of a potential rugpull

Although not all projects with these characteristics are necessarily scams, spotting these indicators should raise a red flag:

Anonymous developers and lack of transparency

While anonymity is part of crypto culture, projects lacking transparency about their creators and founders offer scammers almost total immunity. They can disappear with investors’ funds without fear of consequences.

Absence of smart contract audits

Audits and formal code verifications identify bugs, vulnerabilities, and unexpected behaviors before deployment. Without reviews from reputable security firms, hidden risks remain: functions to create infinite tokens, total control by developers. Beware of audits issued by low-reputation or unknown companies.

Fully unlocked liquidity

If a project does not lock its liquidity or lacks a transparent vesting plan for the creators’ tokens, there’s a high risk that funds will be withdrawn or dumped onto the market at any moment. Legitimate projects lock liquidity and implement vesting periods (usually between one and four years) for team members. It’s not an absolute guarantee, but it builds trust and signals commitment to long-term success.

Exaggerated promises and unverified backing

Projects promising astronomical returns or guaranteed profits are red flags. If they claim support from well-known investors, reputable companies, or famous influencers, these claims must be backed by concrete evidence: official public statements or publicly confirmed partnerships.

How to build an effective defense

While total protection doesn’t exist, a series of actions significantly reduces the risk of falling victim:

Do your own research (DYOR)

Don’t rely solely on headlines, hype, or influencer endorsements. Analyze the project independently. Start by reading the whitepaper to understand objectives, underlying technology, and tokenomics. Use block explorers like Etherscan or SolScan to examine initial token distribution, verify if ownership of the smart contract has been renounced, and inspect transaction history for suspicious activity.

Check the status of locked liquidity

Ensure the project has secured its liquidity and for how long. Many legitimate teams use third-party services to manage these locks, making the process verifiable and transparent for investors.

Review available audits

Verify that the audit report is publicly accessible and up-to-date. Outdated reports may not cover recent code changes. While audits don’t guarantee complete security, they help identify common bugs, vulnerabilities, and potentially malicious code.

Choose established platforms

When exploring new tokens or NFTs, gravitate toward exchanges with solid reputations and rigorous verification processes. Reliable platforms apply strict evaluation criteria and conduct due diligence on teams before listing, drastically reducing the risk of encountering fraudulent projects.

Conclusion: constant vigilance in the crypto landscape

Rugpulls remain an endemic plague in the crypto space, especially in dynamic sectors like DeFi, where new projects emerge daily. Although many teams operate with genuine intentions, the lack of regulation continues to leave room for dishonest actors. As tools, audits, and educational resources become more accessible, identifying potential scams becomes progressively easier. However, thorough research and cautious approach remain essential when considering any investment opportunity.