A hard rug pull is when a developer has no intention of ever completing a project and intends to scam investors from the start, such as “hardwiring” a project’s code to leave an avenue open for theft. Instead, soft pulls tend to rely on marketing hype to falsely inflate a project’s value, and then the project’s founders shut it down and run away with the money. A more covert tactic involves blocking or limiting a users’ ability to sell coins on a trading platform, which can be manipulated at any point in time. Once an exchange has attracted a substantial amount of traffic, backend fraudsters may amend a project’s code to only grant traders the ability to buy into a platform. Meanwhile, selling of the native token is disabled — either partially or entirely — across all but malicious accounts, effectively pouring money into the wallets of corrupt developers. Rug pull tactics that specifically manipulate smart contract technology to funnel money one way are virtual traps known as honeypots.

Examples of Rug Pulls in the Past

It is not intended to offer access to any of such products and services. You may obtain access to such products and services on the Crypto.com App. Built In strives to maintain accuracy in all its editorial coverage, but it is not intended to be a substitute for financial or legal advice. The hacker stole over $2 billion worth of cryptocurrency from Thodex users, and the exchange’s founder, Faruk Özer, then disappeared. The crypto sleuth ZachXBT revealed that $6.3M raised by Animoon was transferred to the Binance and KuCoin accounts linked to the project’s contract deployer and co-founder.

Rug Pull – Top Crypto Scams & How to stay safe from rug pulls

While hard rug pulls are typically illegal, since it’s usually clear the developer has stolen investor funds with no intention of completing the project, soft rug pulls may not be technically illegal, though highly unethical. Because a soft rug pull can take years to occur, it can seem as if the developers are still actively working on the project, and they may be. Also known as “pump-and-dump” schemes, these rug pulls operate off of fabricated public hype, often fueled by social media. Their aim is to lure swaths of eager crypto investors, enlisted to balloon the value of a shiny new token tied to a trending, up-and-coming project.

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In the fall of 2021, an anonymous developer known as Evil Ape disappeared after taking $2.7 million of investor funds. Investors had fallen for a bogus NFT project called Evolved Apes, a collection of 10,000 cartoon apes that was supposed to include a fighting game. While the game was never developed, the NFTs exist and can still be found on OpenSea, an NFT marketplace. We’ll cover the types of rug pulls, real-life examples and how to avoid falling for one yourself. The offers that appear on this site are from companies that compensate us. But this compensation does not influence the information we publish, or the reviews that you see on this site.

Fraudsters often attract victims with a sudden, sharp increase in the token’s value in a short period. Once the price peaks, the people behind the token sell it to generate a profit while leaving “investors” with steep losses. Some scams even use trusted key opinion leaders in the social space to gain trust. Others promise extremely high yields or offer exclusive digital goods, as seen in NFT rug pulls. Faruk Fatih Ozer, the founder of Thodex, formerly one of Turkey’s largest cex kingston upon hull reviews crypto exchanges, fled to Albania in 2021 after allegedly defrauding his platform users of $2.7 billion in funds. Before fleeing Turkey, Ozer’s company offered new registrants millions of free dogecoins, which many users say they never received.

Frosties NFT

Executing a rug pull often involves exploiting software engineering at large tech software development a blockchain’s smart contract functionality. Here, developers may exploit self-executing programs responsible for transaction verification by using nefarious code, literally writing traps into a project’s programming. The unsuspecting investor is left with worthless tokens, while the developer team runs away with the Ethereum (or BNB, SOL, AVAX). These scams work well on DEXes, because they allow any developer to list a token for free, without any vetting — the responsibility falls to the buyer of the token. Centralized exchanges generally go to great lengths to protect their client base. According to Immunefi, in 2022, the crypto world lost around $175M in different forms of fraud including rug pulls representing a 96.9% decrease compared to 2021.

1. A hard rug pull is when a developer has no intention of ever completing a project and intends to scam investors from the start, such as “hardwiring” a project’s code to leave an avenue open for theft.
2. While the game was never developed, the NFTs exist and can still be found on OpenSea, an NFT marketplace.
3. Crypto rug pulls remain a significant threat in the crypto space, preying on unsuspecting investors and causing substantial financial losses.
4. We do not include the universe of companies or financial offers that may be available to you.
5. In the fall of 2021, an anonymous developer known as Evil Ape disappeared after taking $2.7 million of investor funds.

Each rug pull case needs to be investigated individually to determine whether it is a crime or just a form of unethical behavior. As many crypto experts say, don’t invest money you can’t afford to lose. Please note that the cryptocurrency trading in 2021 availability of the products and services on the Crypto.com App is subject to jurisdictional limitations. Crypto.com may not offer certain products, features and/or services on the Crypto.com App in certain jurisdictions due to potential or actual regulatory restrictions. The purpose of this website is solely to display information regarding the products and services available on the Crypto.com App.

Therefore, this compensation may impact how, where and in what order products appear within listing categories, except where prohibited by law for our mortgage, home equity and other home lending products. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range, can also impact how and where products appear on this site. While we strive to provide a wide range of offers, Bankrate does not include information about every financial or credit product or service. A rug pull is a scam where a cryptocurrency or NFT developer hypes a project to attract investor money, only to suddenly shut down or disappear, taking investor assets with them. The name comes from the idiom “to pull the rug out” from under someone, leaving the victim off-balance and scrambling.