Cryptocurrency Rug Pulls Complete Guide: All You Need to Know

• Rug pulls are some of the most common crypto scams.
• To protect yourself from these scammers, developers should be aware of the three main categories.

The rise of the cryptocurrency industry has drawn many con artists looking to make a quick profit. Rug pulls have become common on Web3, despite the fact that some cryptocurrency scams employ conventional fraud strategies like Ponzi schemes. Rug pull scammers frequently employ malicious smart contracts, scamming retail investors of millions of dollars.

Everyone participating in the cryptocurrency industry needs to be aware of rug pulls and know how to avoid being a victim to this scam.

Three main categories exist: 

1. Liquidity theft that takes place when token creators take money out of the liquidity pool. Several decentralized exchanges (DEXs) and crypto financing platforms depend on liquidity pools. Anybody can add cryptocurrency to these pools with smart contracts to increase the total value locked (TVL) on a Web3 protocol. Developers can withdraw monies from the protocol into their wallets and stop working on the project if they don’t include transparent locking measures in their code.

2. Limiting sell orders: When creators programme the tokens so that they are the only ones able to sell them, and they liquidate their positions once there is enough positive price activity, leaving a token that is worthless. 

3. Dumping, in which developers hastily sell off a large quantity of tokens, bringing the price of the coin down. Another name for it is a pump and dump scheme.

Some Notable rug plugs

Thodex: A Turkish cryptocurrency exchange called Thodex vanished in April 2021 with approximately $2 billion in investor cash. 

A significant sum of cryptocurrency was stored in the accounts of several of their investors. Kaan Savukduran, a dealer, has almost $12,000 worth of Dogecoin held on Thodex. Seven investors were represented by Mertcan Bayraktar, another dealer, one of whom had three Bitcoin ($150,000) locked up in Thodex.

SQUID rug pull token: One of the most damaging limiting-sale rug pulls is the Squid Game rug pull. An unidentified group introduced the SQUID cryptocurrency soon after Netflix’s “Squid Game” shot to fame worldwide. This token was allegedly intended for use in a play-to-earn game based on the Netflix series. The SQUID token reached a high of almost $3,000 per token when it first launched in late 2021 before tumbling to zero.

Uranium Finance: In April 2021, Uranium Finance tweeted that $50 million in investor funds had been stolen. Igor Igamberdiev of The Block Research claims that the Uranium protocol was depleted of numerous coins, including ether and bitcoin.

Frosties NFT rug: Ethan Nguyen and Andre Llacuna were detained by the U.S. Department of Justice in March 2022 for their involvement in the fictitious NFT (non-fungible token) project known as “Frosties.” 

According to estimates, the couple made around $1.1 million from the sale of these animated NFTs. Nguyen and Llacuna abruptly shut down the official Frosties Twitter account and Discord server after minting the NFTs. The principal developers’ abandonment of the Frosties project was evident to the NFT community.

Luna Yield: Luna Yield was an ecological liquidity farming project built on the Solana (SOL) platform. The SOL project had been growing quickly when Luna Yield disappeared, reaching $2 billion in total locked value (TVL). The developers of the initiative quickly deleted their Twitter, Telegram, and website addresses and took over $10 million in cash. 

Investors in Luna Yield attempted but were unable to withdraw their unstaked cash due to the pool’s negative value following the deletion of the social media pages. A second investigation led the Luna Yield community to learn that the transactions that led to the rug pull were linked with the project’s developer’s address.

AnubisDAO: On October 28, 2021, AnubisDAO, an offshoot of OlympusDAO, was launched. A decentralised digital currency called OlympusDAO is supported by bond sales and fees from liquidity providers. 

Before the launch, the token’s developers set up a Twitter account and a discord server where they would provide updates. 

The ICO, which would have given them ANKH tokens as compensation, attracted almost $60 million in investment despite the absence of a platform. Someone transferred all of the pool’s liquidity to a new wallet while the sale had been active for 20 hours. Many investors believed that the token would become popular with the general public in the same way that other coins with canine themes had.

Conclusion 

The list of cryptocurrency rug pulls is long. The ones that were featured above are just a small sample of the long list of cryptocurrency fraud and scams. The fact that some well-known people have been victims of these crimes shows that no one is immune from them. Popular billionaire Mark Cuban is one example. 

Several famous people, including Kim Kardashian, Snoop Dogg, Lil Uzi, and Logan Paul, have been charged with supporting schemes. 

In-depth market research and project analysis are necessary for investors to avoid fraud and other bad occurrences.

Steve Anderson is an Australian crypto enthusiast. He is a specialist in management and trading for over 5 years. Steve has worked as a crypto trader, he loves learning about decentralisation, understanding the true potential of the blockchain.

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