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LIBRA, Squid Game to OneCoin: A Review and Insights on the Biggest Rug Pull Scams in the Crypto Market
Original Title: What Are Rug Pulls in Crypto and How to Avoid Them
Original author: Josiah Makori
Source text:
Compiled by: Daisy, Mars Finance
What is a "Rug Pull" in cryptocurrency and how to avoid it?
What is a Rug Pull?
A Rug Pull is a type of exit scam where developers launch a crypto project and attract investors' funds. They then suddenly abandon the project and disappear with the money, causing the tokens held by investors to become worthless.
Common warning signs:
No audit (not security reviewed)
Liquidity not locked (developers can withdraw funds at any time)
Anonymous team (team members' identities are opaque)
The price suddenly surged (the price has risen abnormally, which may be market manipulation)
A small number of wallets hold a large amount of tokens (highly concentrated, easy to manipulate the market)
Key Points
A Rug Pull is a type of exit scam where developers launch a cryptocurrency project, attract investors' funds, and then run away with the money, leaving behind worthless tokens or other digital assets.
Main warning signals: lack of audits, liquidity not locked, uneven token distribution, etc.
How to protect yourself: Use tools like GeckoTerminal for research, which has built-in Rug Pull monitoring features to help investors identify risky projects.
The term "Rug Pull" originates from "pull the rug from underneath" (suddenly pulling the rug out from under someone, causing them to fall). In a Rug Pull scam, developers raise funds by selling tokens, then suddenly shut down the project and abscond with the money, leaving investors with tokens that become worthless.
According to a report by Chainalysis, the incidence of Rug Pull scams has decreased. In 2021, Rug Pull scams stole a total of $2.8 billion, whereas in 2024 it dropped to $496 million. However, these types of scams have not disappeared, with the most recent being the LIBRA exit scam, which occurred in February 2025.
Understanding Rug Pull scams in cryptocurrency
In a Rug Pull exit scam, developers create a new token and list it on a decentralized exchange (DEX), usually pairing it with common stablecoins like USDT.
Common fraud techniques used by developers:
Promise high returns to attract investors.
Commitment to exclusive digital products (such as NFTs, claiming that holders can gain special advantages).
Hire celebrities or influencers to vigorously promote (Shill) the token on social media.
By coordinating purchases, artificially inflate the token price.
The purpose of all these tactics is to create FOMO (Fear of Missing Out), attracting more investors to put in their money. Once the pool of funds accumulates enough capital, the developers will suddenly withdraw all the funds, abandon the project, and render the tokens in the hands of investors worthless.
How to identify a Rug Pull?
Typically, Rug Pull projects have obvious warning signs, including:
Liquidity not locked - allows project parties to withdraw assets from the fund pool at any time.
Unequal token distribution - the vast majority of tokens are held by a small number of wallets.
No smart contract audit - the project has not undergone a security review, posing a risk of code vulnerabilities.
Token prices have surged unusually - it might be a "pump and dump" scheme.
Anonymous team with no history - Project team members' identities are opaque and lack credibility.
Locking liquidity means that the project team cannot arbitrarily withdraw assets from the liquidity pool. If the liquidity is not locked, developers can withdraw funds at any time, leading to a market crash.
How to check if the liquidity is locked? You can use tools like GeckoTerminal to check the liquidity status of the funds pool. In the GT score panel of GeckoTerminal, you can see whether the liquidity is locked. Solana tokens: Check Liquidity Lock. ETH tokens: Check Rugpull Risk.
Checking the token distribution on the blockchain explorer and GeckoTerminal will help you understand who holds the most tokens and how the tokens are distributed.
If a small number of wallets hold a large amount of tokens, it becomes easy to quickly sell off the tokens, thereby increasing the risk of price manipulation and vote buying. Tokens with greater decentralization are generally safer, as they can protect users from extreme price manipulation by a few large holders in the short term.
Most well-known projects share information about smart contract audits on their websites. Smart contract auditors will categorize and describe the errors and issues they find during the audit process, explaining their severity and the potential impact on the contract and its users.
If the project team does not address critical issues, it may negatively impact the project, as this means that the contract could be exploited by the project team or malicious external actors.
Just like pump and dump schemes, you should be cautious about tokens that experience a sharp increase in price over a few hours or days, as this may indicate the presence of a pump and dump scam. If you see an asset's value skyrocketing, try to identify the driving force behind it.
Most of the time, when the value of a legitimate token suddenly rises, it may be due to important new partnerships, exchange listings, or significant product releases—all of which are widely reported in the crypto media.
While anonymity is one of the attractions of cryptocurrencies, projects launched by unknown anonymous teams can be a dangerous signal, especially if the project has not undergone any smart contract audits. In the case of token issuance, you can check GeckoTerminal to see if the creators have any problematic Solana token issuance records.
How to Avoid Rug Pull Scams
You can reduce the risk of encountering Rug Pull scams by following these methods:
Avoid projects with extreme speculation.
Check team activity and community engagement.
Review using GeckoTerminal, including:
Bundled Buys
Freeze Authority
Mint Authority
Liquidity Lock
Honeypots
Reentrancy Risks
Creator History
Check the smart contract and token details
As mentioned above, most reputable crypto projects undergo smart contract audits to prove their legitimacy. Before investing, carefully read the audit results and ensure there are no unresolved critical issues, as this could mean that the smart contracts managing the project may be exploited.
For tokens like memecoins that are unlikely to undergo extensive smart contract audits, you can use GeckoTerminal to check for any warning signs around the token, as indicated by the GT score, including:
The number of tokens purchased through bundled purchases can be used to raise the price of tokens before pulling.
Freezing permissions can prevent holders from trading tokens.
Minting Rights, allowing the contract creator to mint new tokens.
Liquidity locking ensures that the tokens provided to the pool are locked and prevents the creator from withdrawing them.
Honeypot, where tokens may be unsellable due to contract functions or malicious code.
Reentrancy risk, malicious contracts can attempt to extract tokens from the pool's smart contract.
If it sounds too good to be true, it usually is a scam. Scammers often exploit FOMO psychology, making investors worry about missing out on a "once-in-a-lifetime" opportunity and invest quickly. Be wary of promises of "extraordinarily high returns," especially projects that require you to "get in immediately, or you'll miss the opportunity."
When researching a project, focus on:
Are social media (Telegram, Twitter, Discord) active?
Is there genuine community discussion, rather than just marketing propaganda?
Does the project official website provide smart contract audits and team identity information?
How to verify team identity?
Search for team members on LinkedIn to verify if they have a genuine industry background.
Check the code contribution records on GitHub to ensure the team has development experience.
Check the latest news on tokens on platforms like CoinGecko and look for any suspicious events.
Common types of Rug Pull scams
Rug Pull is mainly divided into Hard Rug Pull and Soft Rug Pull:
Hard Rug Pull - The project party directly absconds with the funds, deleting all social media accounts and the official website.
Soft Rug Pull - The project team gradually withdraws, reduces communication, and ultimately abandons the project, leaving investors holding worthless tokens.
An example of liquidity-driven is Squid Game (SQUID), which is a meme token referencing the popular Netflix series Squid Game. The token was heavily promoted on social media, promising users a chance to win SQUID by playing games. Despite the white paper being vague and no project audit conducted, the situation remains the same.
From October 26 to November 1, the price of SQUID surged by nearly 23 million percentage points, rising from a few cents to $2,861.80. Meanwhile, investors were unable to sell their SQUID as the token's smart contract (which controls how the project operates) only allowed the creators to sell the tokens, which took approximately $3.38 million from investors. Subsequently, the developers withdrew all the BNB from the pool. This moment was captured live by Twitter user @imBagsy.
Lessons from Squid Game
Avoid projects that are overhyped but lack smart contract audits. Always check if the pool's contract has unlocked liquidity and resist FOMO.
Fraud methods:
Developers use social media and KOLs to artificially hype up tokens, driving up the price (Pump).
After the price surged, developers sold off the tokens they held, causing the price to plummet (Dump).
Case: LIBRA Fraud
In February 2025, Argentine President Javier Milei promoted the LIBRA token on social media.
The token rose to $5.20 within 50 minutes, as the project team held 70% of the total token supply and sold at the peak, causing the coin price to plummet by 85%.
Scammers cashed out $87 million, leaving investors with nothing.
Lesson:
No matter who promotes the token, the token distribution situation must be verified.
Check for large bundle purchases to prevent price manipulation by a few individuals.
Scamming techniques:
Scammers promise to develop a "revolutionary project" to attract investors to invest funds.
After the financing, the team disappeared, and investors held worthless tokens or NFTs.
Case: Evolved Apes Scam
Promise to develop NFT games to attract investors to purchase NFTs.
After raising $2.7 million, the team disappeared and social media updates stopped.
Lesson:
Research team background, check LinkedIn and GitHub records.
Avoid investing in completely anonymous projects and ensure that team members are traceable.
Scam tactics:
Promising "high returns", but in reality paying earlier investors with the funds of later investors.
Participants recruit others to earn "referral rewards," and the system eventually collapses, leaving investors unable to withdraw.
Case: OneCoin Ponzi Scheme
OneCoin promises investors that they can "mine" OneCoin tokens and enhance their investment skills through educational courses.
OneCoin does not have a blockchain at all, and the tokens cannot be traded freely; they can only be traded under restrictions on the official platform.
Investors lost over $4 billion, and the founder ran away.
Lesson:
If the token is not traded on a public chain and can only be traded on a closed platform, the risk is extremely high!
Avoid investing in projects that require "inviting friends to join"; these are typical characteristics of a Ponzi scheme.
Is cryptocurrency Rug Pull fraud legal?
Rug pull scams are illegal worldwide, and if law enforcement agencies can catch criminals within their jurisdiction, they are usually prosecuted.
In most jurisdictions, Rug Pull scams are classified as theft or fraud, while actions such as Pump and Dump are considered market manipulation.
Actual case:
OneCoin Scam: Global Police Strike Hard, Chinese Regulators Have Sued 98 Individuals Involved and Confiscated Cryptocurrency Worth $267.5 Million (According to South China Morning Post).
Frosties NFT Scam Case: The scammer is charged with conspiracy to commit telecom fraud and money laundering, with the amount involved reaching millions of dollars. Although some cases have resulted in successful prosecutions, many scammers are still able to escape with their illegal gains.
Conclusion: Be sure to confirm again before investing!
Although Rug Pull scams are no longer the most common type of cryptocurrency fraud, projects with high returns and skyrocketing token prices still carry significant risks.
This article introduces how to verify project authenticity and common warning signals, helping you reduce the risk of being scammed.
Projects that lack transparency, have no audit certification, and sound too good to be true are most likely scams!
⚠ Scammers are constantly coming up with new tactics. No matter how social media promotes it, always stay vigilant and conduct your own due diligence (DYOR) to avoid becoming a victim.
📌 The projects mentioned in this article are for case analysis only and do not constitute investment advice.
Frequently Asked Questions (FAQs)
🔸 Very difficult.
Cryptocurrency transactions are typically irreversible, and coupled with anonymity, this makes tracking difficult.
You can file a lawsuit, but the chances of successfully recovering the funds are very low.
🔸 Not necessarily.
Rug Pull scams are a type of "exit scam" that typically involve trading restrictions (investors are unable to sell their coins) or sudden sell-offs (the price of the coin plummets, and the tokens become worthless).
If only a core member leaves but the project is still operating normally, this does not count as a Rug Pull.
🔸 A Rug Pull is a carefully planned scam, while failed projects may be due to mismanagement or market changes.
Rug Pulls usually happen very quickly, with the team suddenly disappearing or withdrawing funds.
Project failure is usually a gradual process, where you can observe a decline in TVL (Total Value Locked) or token prices, or an inability to deliver products as promised.