How To Detect a Crypto Rug Pull

crypto rug pull

As more and more individuals put their money into cryptocurrencies, crypto rug pulls have grown more popular in recent years. Crypto rug pulls are a type of exit scam that involves malicious developers coding hidden backdoors into their tokens, withdrawing all the coins from the liquidity pool, or quickly selling off large amounts of tokens in order to drive down their price and leave remaining investors holding worthless assets.

A rug pull is succinctly defined as “a scam where the team pumps the project as much as possible before disappearing with funds, leaving investors with a worthless asset” (with possibly no exit liquidity) source. The term might have come from the idiomatic expression pull the rug out (from under someone) or to suddenly take away important support from someone. A rug depicts the resource taken away.

Rug pulls come in various flavors but they usually involve some aspect of liquidity limiting or rapid selling where the price depreciates very quickly. Some examples of rugs can be found here. Please note that just because a prominent member of a team announces they’re leaving the project or stepping down, that doesn’t exactly mean it’s a rug. When Charlie Lee sold his LTC at the top, the project didn’t die.

Therefore, it is important for all potential crypto investors to understand how they can protect themselves against these types of scams before investing any money into digital currency projects. To do so, they will need to know the different types of rug pulls and how to detect them.

Hard and soft rug pull

There are two main types of crypto rug pulls: hard pulls and soft pulls.

Hard rug pulls are a type of exit scam that can be particularly devastating to investors. They involve malicious developers coding hidden backdoors into their tokens, which allow them to quickly withdraw all the coins from the liquidity pool. This allows them to take advantage of unsuspecting investors who may not be aware of the backdoor.

Soft rug pulls, on the other hand, are when token developers dump their crypto assets quickly. This is done to devalue the token which leaves remaining investors holding a much less valuable asset than what they initially invested in. While this may not be

How to detect a crypto rug pull

1. Look for hidden backdoors: Hard rug pulls involve malicious developers coding hidden backdoors into their token, so look out for these.

2. Check the liquidity pool: If all the coins in the liquidity pool have been withdrawn quickly, this could be a sign of a crypto rug pull.

3. Look out for sudden price drops: If you notice that the price of a token suddenly drops drastically, it may be due to token developers dumping their crypto assets quickly – also known as soft rug pulls.

4. Know when to stop investing: When you start noticing signs of a potential crypto rug pull, it’s important to know when enough is enough and stop investing in that project before your funds are lost forever.

5 Be aware of recent scams: Make sure to stay up-to-date with news and developments related to crypto scams in order to help protect yourself from falling victim to one in future investments.

6. Research the project thoroughly: Always take the time to thoroughly research a digital currency project before investing any money into it. Look out for red flags that may point to a potential crypto rug pull and try to avoid these at all costs.

7. Follow trusted sources: Make sure that you only follow trusted sources of information about the digital currency project you’re interested in investing in. This will help to ensure that you are getting accurate information about the project and will also help protect you from falling victim to a crypto rug pull.

8. Use reputable exchanges: When trading digital currencies, make sure to only use reputable exchanges as there have been reports of unscrupulous exchanges engaging in crypto rug pull scams.

History of crypto rug pulls

Crypto rug pulls have been around since the early days of cryptocurrency. The first recorded instance of a crypto rug pull happened in 2014, when Bitcoin Savings and Trust Ponzi scheme operator Trendon Shavers was arrested for running an $80 million fraud. Since then, other examples of crypto rug pulls have occurred regularly with some high-profile cases involving large amounts of money being stolen from unsuspecting investors.

In 2017, developers at CoinDash lost $7 million after malicious hackers took advantage of their initial coin offering (ICO) by replacing their payment address with one belonging to the hackers. This caused many investors to send funds to the wrong address and they never received any tokens or refunds. In 2018, Kucoin exchange users lost more than $150 million due to a smart contract bug that allowed malicious actors to withdraw funds from various wallets connected to the platform’s ICO system without authorization.

In 2020, QuadrigaCX exchange founder Gerald Cotten passed away unexpectedly leaving behind over $190 million worth of customer deposits locked up on his encrypted laptop as he was the only person who had access to it. Without prior knowledge about how these digital assets were stored and secured, this incident left thousands of people unable to access their funds and sparked a wave of criticism against the management of the exchange.

In 2021, an estimated $7.7 billion was stolen from investors in rug pull cryptocurrency scams. These investors thought they were putting their money into respectable enterprises, but they ended up having their investment opportunities snatched out from under them. According to the findings of Solidus Labs’ Rug Pull study from 2022, an average of 350 fraudulent crypto tokens were generated each day with the intention of defrauding millions of investors.


Regardless of how it is done, crypto rug pulls are a serious problem that can lead to millions of dollars worth of digital currency being lost in an instant. As such, it’s important for investors to be aware of common tactics used by malicious actors in order to spot and avoid any potential rug pulls before they occur. By following the above tips, investors should be better able to protect themselves from falling victim to a crypto rug pull and keep their digital currency safe.   By staying vigilant and doing your due diligence, you can protect yourself from crypto rug pulls and ensure that you make well-informed investments in the future.  Good luck!

Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decisions.


What is a rug pull in crypto?

A crypto rug pull is a type of scam that takes advantage of unsuspecting investors by luring them into investing in a digital asset which then suddenly “pulls the rug” on them and their investment. The scam typically involves a malicious actor who creates a fraudulent cryptocurrency or token with the intention of defrauding investors while they try to make a quick profit.

What are the most common tactics used by malicious actors in crypto rug pull scams?

The most common tactics used by malicious actors in crypto rug pulls include: creating fake cryptocurrency or tokens, setting up unregulated exchanges, limiting sell orders, and liquidity stealing. Additionally, some schemes also involve Ponzi schemes, pump-and-dump strategies, and fraudulent ICOs.

Are rug pulls illegal in crypto?

Crypto rug pulls are not all unlawful. Some are just immoral, while others are elaborate con games designed to steal money from investors. Token dumping, for example, may have a detrimental impact on the market, despite the fact that it is not against the law. In contrast, stealing liquidity is considered a criminal offense in the majority of jurisdictions.

What is the biggest rug pull in crypto?

One of the largest crypto rug pulls to date is the OneCoin scam. According to reports, OneCoin was a multi-level marketing scheme behind a cryptocurrency which fraudulently raised billions of dollars from unsuspecting investors around the world. The founder of the scheme, Dr. Ruja Ignatova, has managed to be on the run from authorities for many years. U.S. officials filed charges against her in her absence for wire fraud, securities fraud, and money laundering at the beginning of 2019. In June of 2022, she was included on the FBI's list of Ten Most Wanted Criminals. Although she was recently found to be alive, the total amount of funds lost in the scam is still unknown.

How do I know if my crypto rug is pulled?

Be suspicious of any investment opportunity which is being promoted as too good to be true or which claims to offer extremely high returns on investments. Watch out for projects that fail to provide transparent information about their team, current or future activities, or the roadmap for their project. Be wary of any tokens with large sell orders and limited liquidity, as these can be signs of crypto rug pulls. If in doubt, do your due diligence and seek professional financial advice before investing.

Alden Baldwin

Alden Baldwin

Journalist, Writer, Editor, Researcher, and Strategic Media Manager: With over 10 years of experience in the digital, print and public relations industries, he has been working with the mantra, Creativity, Quality and Punctuality. In his waning years promises to build a a self sustaining institute that provides free education. He is working towards funding his own startup. As a technical and language editor, he has worked with multiple top cryptocurrency publications such as DailyCoin, Inside Bitcoins, Urbanlink Magazine, Crypto Unit News and several others. He has edited over 50,000+ articles, journals, scripts, copies, sales campaign headlines, biographies, newsletters, cover letters, product descriptions, landing pages, business plans, SOPs, e-books, and several other kinds of content.

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