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What Is a Rug Pull? How Crypto Projects Exit With Your Money
A rug pull is a scam in which the creators of a crypto project or token attract investment, then abandon it and take the money, leaving holders with tokens that cannot be sold or are worth nothing.
Key takeaways
- Creators attract buyers, then drain the funds, often by removing liquidity or dumping their own tokens.
- New tokens with hype and no history are the most common targets.
- Check who controls the token's supply, liquidity and permissions before buying.
- Crypto payments are generally not reversible, so recovery is rare.
How it works
In a rug pull, the people behind a token promote it, collect money from buyers and then vanish with it. The name comes from pulling the rug out from under people standing on it. It can happen in several ways. Creators might withdraw the liquidity that buyers' trades depend on, sell large holdings they kept for themselves, or change the token's code so that others cannot sell.
Common patterns
A fresh token appears with aggressive promotion on social media, often with fake endorsements or a rising chart that seems to confirm the hype. A small team or anonymous creators hold a large share of the supply. Liquidity is not locked, so the creators can remove it. Contracts may include hidden permissions, such as minting new tokens or restricting selling. When enough buyers have put money in, the creators exit.
Warning signs
Look at who holds the supply, whether liquidity is locked for a verifiable period and whether the contract's powers have been renounced or are still active. Be sceptical of pressure to buy now, of promised returns and of tokens whose only story is price. The FTC lists assured profits and promises of quick, easy money as red flags and notes that only scammers guarantee returns.
Limited recourse
The FTC notes that cryptocurrency payments do not come with the legal protections that card payments have and are typically not reversible. Once the money is gone, getting it back usually depends on the other party returning it, which is unlikely. Prevention is the practical defence: only risk what you can afford to lose, research tokens before buying and avoid anything you cannot verify.
Example
A new token surges 10 times in two days on social media hype. The creators hold 40% of the supply and the liquidity is unlocked. They remove the liquidity and sell their tokens. The price falls to near zero and ordinary buyers cannot sell.
Put it into practice
Stick to assets you can research
Scrypt Wallet lists the coins it has added deliberately, and its price pages show the sources behind each number. Research before you swap into anything new.
Explore Scrypt Price Get Scrypt for AndroidFrequently asked questions
Are all new tokens rug pulls?
No, but most failures and many scams are new, hyped tokens with concentrated holdings and no real product.
Can I get my money back?
Usually not. Crypto payments are generally irreversible, and the creators are often anonymous.
How can I check a token before buying?
Look at supply distribution, whether liquidity is locked, what permissions the creator keeps and how long the token has existed.
Written by the Scrypt Wallet team · Updated 2026-10-02. General education, not financial, tax or legal advice.