Rug pull is a type of fraud that happens when the very creators of a project – the people investors trusted – suddenly drain all the funds and vanish.
No hackers, no outside criminals. Just the token creators themselves walking away with the money. A rug pull is a metaphor for “pulling the rug out from under someone,” perfectly capturing the experience of investors watching a token collapse instantly.
These scams usually start with a hyped-up new token or NFT collection. Early investors pour in, liquidity grows, and the hype skyrockets. Then the creators withdraw all funds, leaving everyone else holding worthless assets.
Crypto communities on social media platforms like Twitter/X and Reddit coined the term “rug pull” around 2020, during the boom of decentralized finance (DeFi). Some of the biggest crypto rug pulls occurred during the 2021 bull run.
Chainalysis reported that rug pulls stole more than $2.8 billion in cryptocurrency that year, accounting for 37% of all crypto scam revenue. Today, rug pulls continue to make up a large portion of crypto scams, as launching new coins like memecoins has become easier.
Rug pulls are typical in crypto, as creators can set up a token and control the liquidity themselves, enabling them to withdraw it entirely. In traditional markets, scams exist, but the structure of rug pulls originated in crypto.
Infamous crypto rug pulls: the biggest scams in history
It’s hard to identify the biggest rug pull crypto has experienced, as the line between a rug pull and other reasons for failure is often blurred. There are high-profile cases and discussions about tokens linked to celebrities or government officials that were not recognized as rug pulls, even though they followed similar patterns after launch.
Therefore, there are two types of rug pulls: hard rug pulls that cause immediate loss of investors and soft rug pulls where the creators gradually exit a project, often selling off tokens slowly or reducing liquidity over time. Below, we’ll discuss cases that are broadly considered rug pull scams.
AnubisDAO
AnubisDAO, launched on October 28, 2021, was a dog-themed DeFi project promising a decentralized reserve currency. Within 20 hours of its launch, it raised over 13,500 ETH, worth around $60 million, from investors.
The rug pull occurred immediately when a single developer controlling the liquidity pool drained all funds. Blockchain evidence confirmed it was an inside job, despite initial claims of a phishing attack.
Squid Game Token
The Squid Game Token (SQUID) launched on October 26, 2021, riding the hype of Netflix’s “Squid Game” series. Promising a play-to-earn game, it falsely claimed ties to the show.
The token surged from $0.01 to $2,861, attracting 43,000+ investors. Investors could buy SQUID but were unable to sell it, trapping their funds. On November 1, the developers drained $3.38 million and abandoned the project, leaving investors with worthless tokens.
ZKasino
ZKasino was a crypto gambling platform built on an Arbitrum-based Layer-2 chain. It claimed to use “zero-knowledge proofs” to protect user privacy, though critics like Vitalik Buterin later pointed out that this was mostly marketing hype.
The platform ran a “bridge-to-earn” campaign, promising that users could deposit ETH – over 10,500 in total, worth about $33 million from around 10,000 investors – earn ZKAS token rewards, and withdraw their original ETH within 30 days of the mainnet launch.
In April 2024, Dutch financial authorities launched an investigation after investors reported they were not receiving their funds as promised.
A 26-year-old man was arrested on suspicion of fraud. Users have not been refunded, while the ZKasino scammer’s wallet lost $27.1 million after its ETH position was liquidated on the decentralized exchange (DEX) Hyperliquid.
NFT rug pulls: when artwork meets exploitation
Crypto rug pull examples also include a number of NFT-related fraud cases. NFT rug pulls follow the same pattern: projects launch with flashy artwork, hype, and celebrity endorsements, only for the creators to vanish with investors’ funds once the tokens are sold. Among the biggest NFT rug pulls are:
Frosties NFT
Frosties was an Ethereum-based NFT collection launched in January 2022, featuring 8,888 colorful, ice-cream-inspired characters. Promising raffles, merchandise, staking rewards, giveaways, and metaverse access, it sold out quickly at 0.04 ETH per mint, raising about 355 ETH, or 1.1 to 1.3 million dollars.
Shortly after the mint, the anonymous founders drained the treasury, deleted social channels, removed the website, and delisted the NFTs, leaving holders with worthless tokens. In March 2022, the U.S. Department of Justice charged the Frosties founders with fraud and money laundering.
Baller Ape Club
Baller Ape Club appeared on Solana on October 1, 2021, copying the famous Bored Ape Yacht Club with 5,000 cartoon apes at 2 SOL each. The project quickly sold out, raising over 12,000 SOL, or around $2.6 million. Almost as quickly as the hype, the developers vanished.
They deleted the website and social accounts and drained all the funds into anonymous wallets. Baller Ape Club became the largest NFT rug pull at the time.
An investigation found that Vietnamese national Le Anh Tuan was the leader behind the scam. The U.S. Department of Justice brought criminal charges against six defendants in four separate cases for cryptocurrency-related fraud, including the Baller Ape Club NFT rug pull.
Rug pull red flags: how to spot a crypto scam early
The crypto scandals we’ve mentioned – from Frosties NFT to ZKasino – share common warning signs: over-hyped tokens, locked liquidity or sell restrictions, and sudden social media blackouts.
Always verify smart contract ownership, check for doxxed founders, and look for third-party audits before investing. One misstep can turn fear of missing out (FOMO) into financial ruin.
Pro tip: Consider analysis – pros and cons of a crypto project or platform like this Kraken review on GNcrypto to make informed decisions and avoid falling victim to fraudsters.