rug pull
A crypto scam where developers abandon a project and drain liquidity after attracting investor funds, leaving holders with worthless tokens.
Example
“The new DeFi protocol's rug pull drained $30 million in 24 hours — developers disappeared with all the liquidity.”
Memory Tip
RUG PULL = crypto fraud. Developers attract money, then disappear with all of it.
Why It Matters
Understanding rug pulls is critical for anyone investing in cryptocurrencies or new digital tokens, as they represent a total loss of invested capital with no recovery options. Recognizing the warning signs of potential rug pulls can help you protect your savings and avoid becoming a victim of cryptocurrency fraud.
Common Misconception
Many people assume that rug pulls only happen to inexperienced investors who do not do proper research, but even sophisticated investors have lost substantial amounts to well-executed scams with professional-looking websites and marketing. The scammers often use social media hype and fake endorsements to make their projects appear legitimate before executing the theft.
In Practice
In 2021, a token called SafeMoon attracted hundreds of thousands of investors who collectively deposited over 600 million dollars, believing in the project after seeing aggressive marketing campaigns. The developers then removed all liquidity from exchange pools worth millions of dollars, making it impossible for token holders to sell their holdings, leaving retail investors with worthless tokens worth nothing.
Etymology
RUG PULL (pulling the rug out from under someone) — developers PULL the RUG (liquidity) out suddenly.
Common Misspellings
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See Also
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