"Bitcoin Mayor" Eric Adams' NYC token, rug pull and market risk to learn from suspicion

Rug pulls refer to fraudulent activities in which developers of crypto asset projects rapidly withdraw funds from liquidity pools, leaving investors unable to sell. Launched by former New York City Mayor Eric Adams, this very alleged rug pull emerged with the NYC token, which recorded a nearly 80% crash in just a few days.

What is a rug pull? Investors are harmed by rapid liquidity removal

The NYC token, which was proposed as an activity project for New Yorkers, was deployed on the Solana blockchain. Shortly after its launch, the token surged to a market capitalization of approximately $580 million, but the subsequent price fluctuations were dramatic.

According to on-chain data, wallets tied to token deployers have boosted approximately $3 million worth of USDC liquidity near the market’s peak. Rug pull refers to the rapid removal of such liquidity, and once executed, the trader will not be able to close the position and will suffer significant losses.

Approximately $1.5 million was subsequently refunded, but approximately $900,000 was not returned, further increasing investor distrust.

Funding Flows Revealed by On-Chain Analysis

On-chain tracking data confirmed by CoinDesk revealed multiple fund transfers after the token launch. While the initial liquidity removal caused prices to plummet, the subsequent series of partial refunds and additional capital injections raised suspicions that it was a strategic market manipulation.

NYC Token’s official statement describes these liquidity adjustments as “a response to initial demand,” but according to data from DEXScreener, the token has crashed from around $0.47 immediately after its launch to around $0.13 now. It is calculated that more than $400 million in market capitalization has disappeared since its peak.

Eric Adams’ team denies it, but market doubts remain

Adams’ team vehemently denied that “no funds were being withdrawn from the token” and claimed in a statement to CoinDesk late Wednesday night that they were “not moving investor funds.” However, the on-chain record is obvious. The fact that $3 million in liquidity has moved out of the wallet remains unchanged.

This negative statement has created further concerns in the market. In the crypto market, where transparency is required, on-chain data and different explanations cause credit issues that are different from rug pulls.

Risks of Rug Pulls with Politically Branded Tokens

The NYC token is not just a speculative asset, but a project related to civic activism. Adams said the token’s proceeds will be used for educational programs, scholarships for students from disadvantaged areas, and efforts to combat anti-Semitism and anti-Americanism.

However, the lack of public details on how funds are managed and allocated has amplified market and investor anxiety. Politically branded tokens tend to experience sharp price reversals, if not rug-pulls, due to their lack of liquidity and the opacity of their management regimes, while attracting intense initial demand.

The NYC token case serves as a reminder of the importance of post-public fund management and on-chain transparency in future project evaluations. For market participants, understanding what a rug pull is will be a fundamental literacy to protect their investment decisions.