“Rug pull” is one of the most dreaded terms in crypto. It refers to a scam where a project’s developers suddenly withdraw all liquidity from a token, leaving holders with worthless assets. The name comes from the expression “pulling the rug out from under someone.”
How a Rug Pull Works
The anatomy of a typical rug pull follows a predictable pattern:
Step 1: Create the Token
The scammer creates a new token on a decentralized exchange (DEX) like Raydium, Uniswap, or PancakeSwap. This is trivially easy — anyone can create a token in minutes.
Step 2: Add Liquidity
The scammer deposits the token along with a real currency (SOL, ETH, BNB) into a liquidity pool. This makes the token tradeable on the DEX.
Step 3: Hype It Up
Using social media, Telegram groups, and paid influencers, the scammer creates artificial buzz around the token. They might promise a revolutionary product, fake partnerships, or claim celebrity endorsements.
Step 4: Wait for Buyers
As people buy the token, its price increases. The scammer’s share of the liquidity pool grows in value.
Step 5: Pull the Rug
When enough money has entered the pool, the scammer withdraws all the liquidity. The token’s price crashes to near zero instantly, and holders cannot sell because there’s no liquidity left.
Types of Rug Pulls
Hard Rug Pull
The developer drains the liquidity pool entirely. This is the most blatant form — the chart shows a sudden vertical drop to zero.
Soft Rug Pull
The team gradually sells their token holdings over time while maintaining the appearance of an active project. By the time holders notice, the team has dumped millions of tokens and quietly disappeared.
Honeypot Rug
The token contract is coded so that only the developer can sell. Buyers can purchase the token freely, but when they try to sell, the transaction fails. Eventually the developer sells everything. Check if a token is a honeypot using Is The Token Dead.
Warning Signs of a Rug Pull
Look for these red flags before buying any token:
1. Unlocked Liquidity
If the liquidity isn’t locked in a time-locked contract, the developer can withdraw it at any time. Always verify that liquidity is locked and check who controls the lock.
2. Anonymous Team
While privacy is valued in crypto, a completely anonymous team with no track record is a major risk factor. Legitimate projects typically have doxxed team members or at least a verifiable history.
3. Too-Good-to-Be-True Promises
“1000x guaranteed,” “the next Bitcoin,” “backed by [celebrity]” — these claims are almost always false. Real projects talk about technology and roadmaps, not price targets.
4. Concentrated Token Holdings
If a small number of wallets hold the majority of the token supply, those wallets can crash the price at any time by selling. Check the holder distribution before buying.
5. No Audit
Reputable projects have their smart contracts audited by third-party security firms. While an audit doesn’t guarantee safety, the absence of one on a project raising significant money is concerning.
6. Unusual Contract Functions
Tokens with functions like setMaxTransaction, blacklistAddress, or pause give the developer significant control over trading. These can be used to prevent selling.
How to Protect Yourself
- Check before you buy — Use Is The Token Dead to instantly analyze any token’s health metrics and security flags
- Verify liquidity locks — Don’t trust claims; verify on-chain
- Start small — Never invest more than you can afford to lose in a new token
- Watch the holder distribution — Concentrated holdings = concentrated risk
- Be skeptical of hype — The louder the marketing, the more suspicious you should be
What to Do If You’ve Been Rugged
If you discover you’ve been the victim of a rug pull:
- Don’t buy more trying to “average down” — the token is dead
- Document everything — Take screenshots of the project’s claims, social media, and your transactions
- Report it — Submit to platforms like the blockchain’s community scam databases
- Check if you can sell — Sometimes a tiny amount of liquidity remains
Visit the Token Graveyard to see confirmed rug pulls, or check the Weekly Recap for the latest scams our tool has detected.
The Bottom Line
Rug pulls are unfortunately common in crypto, especially in the meme coin and low-cap token space. The best defense is doing your own research before buying. Tools like Is The Token Dead make this easy by checking liquidity, volume, holders, and security flags in seconds.
If a token has been rugged, its death score will reflect that immediately. Don’t be the last one holding the bag.