Rug Pull: Crypto Scam that’s Draining Money from Unsuspecting Investors

Cryptocurrency has surged in popularity since it was launched to the public. But truth be told, the industry of cryptocurrency is full of scammers. Today, one of the most notorious crypto crimes is the “Rug Pull.”

Rug pulls are by far the most vicious scams in the cryptocurrency world. Why? Because these are the type of scams in the cryptocurrency industry wherein a developer abandons the project and takes all of the investors’ money. 

The fraud, which gets its name from the idiomatic expression "pull the rug out from under," involves a developer attracting investors to a new cryptocurrency project, then pulling out before the project is built, leaving investors with worthless currency. It's part of a long history of investment schemes. 

When do Rug Pulls take Place?

Rug Pulls usually occur with new crypto projects that haven't gotten the same analysis supplementary to established cryptocurrencies. The celebrated Squid Game token is an exemplar that comes to mind. In November 2021, The cryptocurrency  Squid Game (SQUID) immensely collapsed in price. The project promised that an anti-dumping mechanism was written into the code, making the $ SQUID token immune to a flash crash. This token dropped in value from $2,500 to mere centsThis token dropped in value from $2,500 to mere cents in a matter of seconds.

In particular, Rug pulls have been commonly used in decentralized finance or DeFi projects that seek to make a mess of services such as banking and insurance. In addition, NFTs that provide digital ownership of art and other content have also been involved in rug pulls. This token dropped in value from $2,500 to mere cents

Ultimately, newer projects are a startup, which means it doesn't have a solid founding team yet. And there may be vulnerabilities that make it possible for their organizers to pump value away from investors and keep it for themselves.

Should you be Concerned?

Crypto Rug incidents that ever exist only give you sight into the horrendous world of scams and frauds. But does it mean you should stay away from cryptocurrency altogether? Absolutely not! You wouldn’t stay away from dating just because people cheat. They say ‘hate the player, not the game,’ and this also applies to cryptocurrencies.

However, it is okay to be a little bit more careful. I bet you don’t want to be woken up falling prey to this type of incident, so be on the lookout and stay vigilant!