What Are Rug Pulls and How You Can Avoid Them

Understanding Crypto Rug Pulls

Here's how the rug pull scam typically enfolds:

Here are some common strategies developers use to draw in as many victims as possible:

• Promise high returns.

• Promise exclusive digital products that will give them an edge.

• Hire popular personalities to aggressively promote their token on social media.

• Artificially increase value for their tokens through coordinated buying.

All these are designed to inspire the fear of missing out (FOMO) in investors, and as the hype builds, so does the amount of money locked into the project. 

Once the project has accumulated enough capital, the developers will suddenly withdraw all the funds and abandon the project, leaving their victims holding valueless tokens.

When it comes to rug pulls, prevention is better than cure, so let’s look at some tips on how to identify rug pulls.

How to Identify and Avoid Rug Pulls

There are usually warning signs around a rug pull project. These include:

• Loopholes that let project owners withdraw assets.

• Irregular token distribution, where a large amount of tokens are held by a small number of wallets.

• Promises of unrealistic yields and returns (may feature popular personalities). 

• Sudden unexplained spikes in token value.

• An anonymous team with no track records. 

With these warning signs, you can avoid rug pulls:

• Looking out for security audits: Reputable projects typically undergo security audits to ensure security. 

• Checking for loopholes: You can check for loopholes by researching the token thoroughly with tools like GeckoTerminal that highlights issues with the token.

• Reviewing token distribution: Look out for situations where most of the tokens are held by a few holders.

• Researching price surges: A sudden price increase for no reason may be designed to lure investors before developers cash out. 

• Verifying team legitimacy: Engage with the project’s social media and research team members on platforms like LinkedIn.

Learn more about how to protect yourself from rug pulls.

Common Types of Rug Pulls & Crypto Scams

While the methods vary, the goal is always the same: to drain investor funds. This table highlights the 2026 landscape of decentralized exit scams.

Famous Rug Pulls in History

Based on Chainalysis reports, rug pulls are decreasing in popularity, with $2.8 billion stolen in 2021 and approximately $496 million stolen in 2024. However, they can still occur, with the LIBRA exit scam happening as recently as February 2025.

Some of the most famous rug pulls are: