Understanding Crypto Rug Pulls: The $192 Million Threat in 2024

Every year, scammers execute sophisticated schemes that drain billions from cryptocurrency investors. At the heart of these schemes lies one of the most devastating tactics in the digital asset space: the rug pull. In 2024 alone, the rug pull scam cost investors over $192 million according to Hacken, with another $103 million lost to similar frauds according to Immunefi—a 73% increase since 2023. These aren’t isolated incidents; they represent a systemic threat to the entire crypto ecosystem. Memecoin platforms like Pump.fun have exacerbated the problem, particularly on Solana, where investors suffered the highest concentration of rug pull attacks in 2024.

Understanding how these scams operate and recognizing the warning signs isn’t just about protecting your portfolio—it’s about surviving in an industry where billions are at stake. This guide breaks down everything you need to know about rug pulls, including real-world examples, the mechanics behind these attacks, and concrete strategies to keep your investments safe.

Real-World Rug Pull Disasters: What Happened

Learning from actual scams is one of the most effective ways to build your defenses. Here are some of the most shocking rug pull cases that reshaped how investors think about crypto security.

The Squid Game Token Phenomenon

In 2021, developers capitalized on the Netflix series “Squid Game” to launch a token with the same name. The project promised exclusive access to a play-and-earn game inspired by the show. Hype exploded, and the token skyrocketed to over $3,000 per token. Then came the rug pull: developers drained the liquidity pool and disappeared with approximately $3.3 million, causing the token’s price to collapse to nearly zero in seconds.

The pattern repeated in 2024. Following Squid Game Season 2’s December 26 release, PeckShield detected numerous fraudulent tokens using the same name flooding crypto markets. One token deployed on Base saw its price drop by 99% from launch. Similar tokens emerged on Solana, with X accounts promoting them while community members warned that top holders had identical wallet characteristics—a classic sign that insiders planned to dump once retail investors bought in.

The Hawk Tuah Rug Pull

In December 2024, influencer Hailey Welch (known as the “Hawk Tuah” girl) launched the $HAWK token, which surged to a $490 million market cap within just fifteen minutes. The spike was followed by a coordinated sell-off: interconnected wallets dumped 97% of the token supply, causing the value to collapse by over 93% within days. Welch and her associates pocketed millions while investors lost nearly everything. Despite evidence showing coordinated selling, the perpetrators faced no legal consequences.

OneCoin: The $4 Billion Fraud

OneCoin stands as one of the largest Ponzi schemes in history. Founded in 2014 by Ruja Ignatova (dubbed the “Crypto Queen”), OneCoin promised revolutionary returns and claimed to rival Bitcoin. Investors worldwide sent in over $4 billion before the scheme collapsed. The project was never a legitimate cryptocurrency—it relied on an SQL server rather than an actual blockchain, and returns came from new investor funds rather than genuine operations. Ignatova disappeared in 2017, while her brother Konstantin was later arrested and convicted of fraud and money laundering.

Thodex: The Exchange That Vanished

Turkish exchange Thodex launched in 2017 and appeared legitimate for years. In April 2021, it suddenly shut down with over $2 billion in investor funds missing. The founder, Faruk Fatih Özer, claimed a cyberattack forced the closure, but investigation revealed it was a premeditated fraud. Turkish authorities arrested dozens of employees, and Interpol tracked Özer to Albania, where he was arrested in September 2022. Prosecutors are seeking sentences totaling over 40,000 years for those involved.

Mutant Ape Planet: When NFT Dreams Became Nightmares

Mutant Ape Planet (MAP) was an NFT collection modeled after the popular Mutant Ape Yacht Club, promising exclusive rewards and metaverse access. After raising $2.9 million, developers simply disappeared. Investor Aurelien Michel was later arrested and charged with fraud, and MAP NFT values plummeted to nearly zero.

How the Rug Pull Scam Actually Works

A rug pull in crypto is a coordinated exit scam where project developers abandon the venture and steal investor funds. The mechanics are straightforward but devastating. Here’s how the scam unfolds:

The Setup Phase: Developers create a new token and launch an aggressive marketing campaign on social media, recruiting influencers, and making flashy promises. They build hype around features like exclusive games, guaranteed returns, or revolutionary technology. As excitement grows, retail investors rush in, buying tokens and driving up the price.

The Extraction Phase: Once sufficient funds are raised, developers execute their exit strategy. In liquidity-based rug pulls, they drain the entire liquidity pool from the decentralized exchange (DEX), making it impossible for investors to sell their tokens. In token-dumping scenarios, they sell off massive reserves of tokens they minted for free at launch, flooding the market and crashing prices. Some use smart contract code to restrict selling entirely.

The Collapse: The token price crashes to zero within seconds or minutes. Investors are left holding worthless digital assets while developers vanish with the proceeds. The project website goes offline, social media accounts disappear, and communication ceases entirely.

Think of it like a marketplace vendor who sets up an attractive stall, draws a crowd with promises of great deals, accepts payment—then packs up and vanishes before delivering goods. The rug pull is the digital equivalent, except the “stall” operates entirely on code and promises, making exit frictionless.

The Main Types of Rug Pulls Threatening Investors

Not all rug pulls operate identically. Understanding the variations helps you spot them before they steal your capital.

Liquidity Draining

This is the most common rug pull variant. Developers pair a new token with a popular cryptocurrency (like Ethereum or BNB) on a DEX. As buyers purchase the token, liquidity accumulates in the pool, raising its price. Once enough capital is locked in, developers extract the entire liquidity pool using their admin keys. The token becomes instantly unsellable, and its price drops to zero. The Squid Game token used this exact method.

Restricted Selling

Developers embed malicious code in the smart contract that allows purchases but prevents sales. Investors can buy the token, but the code rejects all sell orders. This traps capital within the project indefinitely. Victims experience the frustration of watching their investment disappear while being technically unable to exit their position.

Mass Token Dumping

Developers hold a massive reserve of tokens minted during project launch (often receiving billions of tokens for “development” or as “founders’ allocations”). After hyping the project to drive prices higher, they dump their entire reserve on the market simultaneously. This causes massive selling pressure that crashes prices before most investors can react. The AnubisDAO rug pull operated this way, with developers selling off holdings and driving the token to zero within hours.

Hard vs. Soft Rug Pulls

Hard rug pulls are sudden, complete exits. Developers take all funds and disappear within hours or days. Thodex’s sudden shutdown with $2 billion missing exemplifies this brutal approach.

Soft rug pulls unfold gradually. The core team slowly abandons development while investors maintain a false sense of security. The project remains technically operational but receives no real updates or support. Investors gradually realize the token is abandoned and lose money over weeks or months rather than seconds.

1-Day Rug Pulls

The fastest scams happen within 24 hours of token launch. Developers mint tokens, hype them aggressively for a few hours, attract rapid investment, then immediately dump holdings and disappear. The Squid Game token’s initial 2021 version exhibited this pattern—price spiked to $3,100 in a week, then collapsed to near-zero in seconds.

Red Flags: Spotting a Rug Pull Before It’s Too Late

The difference between profit and catastrophic loss often comes down to recognizing warning signs early. Here’s what to watch for:

Anonymous Teams Are a Major Red Flag

Legitimate projects have transparent founding teams with verifiable credentials. If developers hide behind pseudonyms or provide no background information, treat this as a major warning. Scammers deliberately remain anonymous to avoid accountability. Check LinkedIn profiles, GitHub commit histories, and previous projects. If the team is faceless or unverifiable, the risk is extreme.

Lack of Code Transparency

Projects should publish their smart contract source code on public repositories like GitHub and obtain third-party security audits. If code is hidden or poorly documented, developers are likely hiding vulnerabilities or malicious functionality. Legitimate projects welcome code review because they have nothing to hide.

Unrealistic Promises

Be deeply skeptical of projects promising triple-digit annual yields, guaranteed returns regardless of market conditions, or claims that they’ll “beat Bitcoin.” If returns sound impossible, they are. Scammers use unrealistic promises specifically because they attract desperate investors willing to overlook other red flags.

No Liquidity Locks

Liquidity locks are smart contracts that hold tokens in escrow for a set period (ideally 3-5 years), preventing developers from draining pools. Absence of liquidity locks means developers can remove all funds at any moment. This is one of the most critical warning signs. Always verify lock duration on block explorers before investing.

Overhyped Marketing Without Fundamentals

Scamming projects rely on aggressive marketing to create artificial hype. They flood social media with posts, pay influencers without proper disclosure, and buy advertisements that emphasize “get rich quick” narratives rather than actual technology. Real projects balance marketing with technical development. Heavy marketing noise combined with vague technical documentation is a danger signal.

Suspicious Token Distribution

Examine who owns the tokens. If a handful of wallets control the majority of supply, or if the development team allocated itself an enormous percentage, that’s problematic. Scammers design token distribution to maximize their ability to dump on unsuspecting retail investors. Look for reasonably distributed token supplies and clear vesting schedules for team allocations.

No Clear Utility

Every legitimate token should solve a problem or provide genuine utility within its ecosystem. If a project exists purely for speculation or has vague use cases, it’s likely a scam. Ask yourself: Does this token do something unique? Would it matter if this token disappeared tomorrow? If you can’t articulate why the token has value beyond price appreciation, skip it.

Your Defense Strategy: How to Avoid Rug Pulls

Protecting your capital requires proactive research and disciplined evaluation. Here’s your comprehensive defense system:

Conduct Thorough Due Diligence

Before investing anything, examine the team’s background, read the whitepaper carefully, and verify that past milestones were actually achieved. Check the project’s GitHub for regular commits and code updates. A project with no recent code activity combined with continued marketing claims is suspicious.

Use Established Exchanges

Trading on reputable exchanges like Gate.io provides structural protection. Established platforms implement security protocols, comply with regulations, and offer customer support if issues arise. Trading on less-known DEXs removes these safety layers.

Verify Smart Contract Audits

Identify third-party security audits from reputable firms, access published audit reports, and use tools like Etherscan to verify that deployed code matches published source code. An audited smart contract dramatically reduces (though doesn’t eliminate) the risk of technical vulnerabilities.

Monitor Liquidity and Trading Volume

Check whether liquidity is locked, for how long, and on which platforms. Use CoinGecko and CoinMarketCap to track trading volume. Sudden spikes in volume followed by crashes, or volume that spikes then disappears, suggest manipulation. Use DEX analytics tools to detect real-time liquidity withdrawals.

Verify Team Identity

Look for projects where team members use real names, have visible social media presences, and have track records in crypto. Verify identities through LinkedIn, Twitter, and GitHub. Teams willing to put their reputations behind a project are less likely to rug pull because they have reputational capital to lose.

Engage with the Community

Join official Discord and Telegram channels, ask the team questions directly, observe how they respond, and notice whether community members raise concerns. Communities that actively discuss concerns and where teams answer questions honestly build credibility. Inactive communities or ones flooded with bot-like positivity are warning signs.

Remember the Golden Rules

Only invest capital you can afford to lose. Diversify across multiple projects rather than concentrating bets. Stay informed about emerging scams by following reputable crypto security researchers and community discussions.

Key Takeaways and Final Thoughts

The rug pull crisis in 2024 demonstrated that scams are becoming more sophisticated, better-funded, and harder to distinguish from legitimate projects. The $192 million lost to rug pulls, combined with the surge in memecoin-based fraud on Solana and other platforms, shows that vigilance is non-negotiable.

You now understand what constitutes a rug pull, how these scams mechanically operate, which types pose the greatest risks, and which warning signs demand immediate exit decisions. You know that hard rug pulls vanish overnight while soft rug pulls erode value gradually. You’ve seen how real projects like OneCoin, Thodex, and Squid Game devastated millions.

Most importantly, you have concrete strategies to protect yourself. Due diligence, code audits, team verification, and community engagement aren’t just best practices—they’re your primary defenses in an ecosystem where bad actors routinely steal billions. The cryptocurrency space offers real opportunities, but it also harbors systematic fraud. Treat every new project with healthy skepticism. If something feels off about a project’s team, code, promises, or community, it probably is. Your instincts are often right.

Don’t let the allure of massive returns blind you to obvious red flags. The investors who lose money to rug pulls typically saw the warning signs but ignored them, hoping to catch a moonshot. The investors who preserve wealth are those who respect risk, demand transparency, and walk away from projects that don’t pass their own standards.

Stay informed. Stay cautious. Stay solvent.