- Rug pull is a type of scam in which the project creator runs away with the money invested by investors.
- To avoid getting scammed, it is important to use trustworthy sources.
- Rug pull accounted for 35 percent of scams in crypto in 2021.
Rug pull is a misleading practice in which the creators of the project suddenly leave and withdraw all the funds, leaving the investors rekt (slang used for wrecked in crypto). These rug pulls often rely on false hype or misleading information to attract investors and build trust. It is important for investors to thoroughly research and assess a project before investing to minimize the risk of falling victim to rug pull.
What Is Rug Pull Exactly, and How Is It Performed?
A “rug pull” is a term commonly used in the cryptocurrency world to describe a false practice in which developers or individuals involved in a project unexpectedly abandon it and take off with the investor’s fund, leaving them with significant losses.
It often involves handling the market or misleading investors, creating the impression of a promising project before suddenly disappearing with the funds. Rug pulls are considered unethical and can hurt investors’ trust within the cryptocurrency community.
It happens in such a way that initially the company will promise some new kind of technology or project that will earn so and so and then start selling their tokens or digital assets to raise funds, and when they have raised a sufficient amount of funds, they usually take off with investors money.
How To Avoid Rug Pull
Avoiding rug pulls requires careful research, skepticism, and a dynamic approach to assessing the validity of cryptocurrency projects and DeFi protocols. Here are some steps you can take to minimize the risk of falling victim to a rug pull
- Research the team and project
- Check the audit.
- Community Engagement.
- Unknown developer
- No liquidity lock
Old Rug Pull Scams In Crypto
It’s estimated that investors lost more than $7.7 Billion to the rug pull in 2021 alone. So, we covered a few rug pulls that happened in the past.
Thodex
The founder of Thodex, the cryptocurrency exchange based in Turkey, is Faruk Fazir Ozer, who fled to Albania in 2021 after supposedly defrauding his platform users of 2.7 Billion dollars in funds. Ozer made the news when he was arrested in Albania and extradited to Turkey.
The Turkish government wants to give a sentence of more than 40,000 years to Thodex’s founders and those who conspired with them.
SushiSwap
It happened in 2020. SushiSwap was a type of exchange and trading system that didn’t have a central controlling authority. It was known for its unique features. However, suddenly, the project founder sold all of his project tokens for Ethereum, which made the value of SUSHI tokens go down. This caused the people to make several allegations against the company, but later the money was given back.
Frosties NFT
In 2022, Ethan Nguyen and Andre Llacuna made the news when they were accused of planning to cheat people out of money through fraudulent online transactions and hiding the money they acquired, which was one of the first times the US government took action against these types of scams.
The pair made a digital project called Frosties that they promoted as having prizes, freebies, and special chance offers. A short time after making $1.1 Million from selling Frosties, Nguyen, and Llacuna stopped the project and ran away with the money invested by others.
