Rug Pull
A rug pull is a scam or abuse in which a project's creators or other insiders suddenly withdraw the liquidity or capital that holds a token up, leaving buyers with tokens that can no longer be sold for much, or at all.
How a rug pull works
On a decentralized exchange, a new token trades against a liquidity pool, for example the token paired with ETH. The creator usually supplies that pool. Buyers swap ETH into the pool to get tokens, so the ETH side grows. In a liquidity rug pull, the creator removes the whole pool in one transaction and walks away with the ETH that buyers put in. The token still exists, but there is almost nothing left to sell it against.
Common variants
Hard rug pulls are built into the code: hidden functions that let the creator mint unlimited tokens, block holders from selling, or charge a near-total sell tax. A token that can be bought but not sold is called a honeypot.
Soft rug pulls rely on behavior rather than code: the team holds a large share of supply, promotes the project, sells into the demand and then abandons it. Whether this is illegal depends on what was promised, but for buyers the result is similar.
A well-documented case is the Squid Game token in late 2021, which rose sharply while holders were unable to sell, before the developers cashed out and disappeared.
Warning signs
Liquidity that is not locked or can be removed by one wallet. A few wallets holding most of the supply. A contract that is not verified, has an owner able to mint, pause or change fees, or has no independent audit. Anonymous teams combined with aggressive promises of returns. Heavy pressure to buy fast, and social channels where critical questions get deleted.
Limits of these checks
None of these checks guarantees safety. Liquidity locks expire, audits can miss issues, and a team can be public and still dishonest. Funds lost in a rug pull are almost never recovered, because transactions are final and the money is often moved through mixers or bridges within hours.
Ask Coach about it
Coach is the AI on AtenaCrypto. It explains crypto with live market data, in plain words.
How can I check on-chain whether a token's liquidity is locked and who controls its contract?Ask Coach →
Frequently asked questions
Is a rug pull illegal?
Deliberately deceiving investors is fraud in most countries, but pursuing anonymous creators across borders is hard, so legal recovery is rare.
Can I get my money back after a rug pull?
Usually not. Blockchain transactions cannot be reversed. Reporting to police and to the exchanges involved is still worthwhile, and beware of recovery services that ask for upfront fees, which are often a second scam.
What is the difference between a rug pull and an exit scam?
They overlap. Exit scam is the broader term for any operator vanishing with users' funds, while rug pull usually refers to pulling a token's liquidity or dumping insider supply.
Related terms
Learn it step by step
AC Learning explains these ideas in interactive lessons — the first eight sections are free.
Open AC Learning → Create a free accountAll glossary terms · Educational reference only — not investment, legal, tax or financial advice.