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What is rug-pull: Top 5 most famous cases

What is rug-pull: Top 5 most famous cases

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by Max Nevskyi

a year ago


The cryptocurrency market attracts not only investors but also scammers who seek to profit from people's trust and lack of knowledge. One of the most insidious forms of deception in the cryptocurrency world is a rug pull.

Contents:

What Are Rug Pulls

A rug pull is a fraudulent scheme where cryptocurrency project developers suddenly withdraw all funds from investors, leaving them with nothing. This often happens on decentralized exchanges (DEX), where projects are created and managed anonymously.

Types of Rug Pulls

There are several main types of rug pulls, each with its own characteristics:

  1. Liquidity Drain: Developers suddenly withdraw funds from the liquidity pool, causing a sharp drop in token value.
  2. Fraudulent Tokens: Issuing tokens with no real value or backing and then selling them at their peak.
  3. Fraudulent Projects: Creating fake projects to attract investors and then withdrawing funds.

Notable Cases of Rug Pulls

Let's look at several major cases of rug pulls that have attracted public attention:

  1. OneCoin — one of the largest cryptocurrency Ponzi schemes in history. Its founder, Ruja Ignatova, started the project in Bulgaria, attracting over $4 billion by promising high returns. She claimed OneCoin would surpass Bitcoin, but in October 2017, she disappeared along with investors' money. Ignatova is on the FBI's most wanted list as one of the most sought-after criminals. Her brother Konstantin Ignatov temporarily took over management but was also arrested in 2019 for fraud and money laundering.
  2. Thodex — a Turkish cryptocurrency exchange that collapsed in April 2021, taking more than $2 billion of investors' money. Founder Faruk Fatih Ozer claimed the exchange was hacked before he disappeared. An investigation in Turkey led to the arrest of exchange employees in 2021, and assets were seized. Ozer was arrested in September 2022 in Albania on an Interpol international warrant. Thodex resulted in a 90% loss for investors due to rug pulls in 2021.
  3. AnubisDAO raised $60 million in ETH, offering $ANKH tokens to investors. Soon after fundraising, the organizers disappeared with the raised funds transferred to their wallets. The project had no website or whitepaper, yet many investors fell victim to the scammers, losing significant amounts.
  4. The organizers of Squid Game (SQUID) launched it on the Binance Smart Chain in 2021, attracting investments due to the popularity of the Netflix series of the same name. However, the project turned out to be a rug pull, and the scammers disappeared with $3.3 million, causing harm to investors.
  5. Mutant Ape Planet (MAP) French entrepreneur Aurélien Mischel created the Mutant Ape Planet (MAP) NFT collection, defrauding investors of $2.9 million. He promised token buyers rewards and exclusive access to assets but sold them worthless fake tokens. Mischel was arrested at John F. Kennedy Airport in New York; he also participated in a $1.6 million rug pull in the Crazy Camel Club project.

Rug pull

How to Avoid Falling Victim to a Rug Pull

To avoid falling victim to a rug pull, follow these simple rules and pay attention to details:

  1. Verify the Project Team: Avoid projects with anonymous developers. Research team profiles and their previous experience.
  2. Analyze the Whitepaper: Carefully examine the project documentation, checking for a detailed plan and realistic goals.
  3. Study Smart Contracts: If you have technical skills, analyze the project's smart contract code for hidden functions and vulnerabilities.
  4. Use Trusted Sources: Invest only in projects audited by reliable firms.

Protection and Precautionary Measures

To protect against rug pulls, consider the following precautions:

Recommendation Description
Use DeFi Analytics Platforms Platforms like DeFi Pulse or DappRadar help track project activities and identify suspicious activities.
Monitor Social Media Actively monitor social media and forums to stay updated on the latest news and fraud alerts.
Diversify Investments Do not invest all funds in one project. Spread investments across multiple projects to minimize risks.

 

Conclusion

Rug pulls are one of the most dangerous forms of fraud in the cryptocurrency world. Despite their cunning nature, thorough project verification and adherence to precautionary measures can significantly reduce the risk of falling victim to such schemes.

Invest only what you can afford to lose. There are no guarantees in the cryptocurrency world, and everyone should be prepared for risks.said a crypto analyst.

Always remember the importance of critical thinking and independent analysis when investing in cryptocurrency projects.

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