Rug Pull
When developers disappear with your investment overnight
Definition
A rug pull is a type of crypto exit scam where project developers abandon a project and steal investor funds by draining the liquidity pool, selling large founder token allocations, or exploiting a backdoor coded into the smart contract. Rug pulls are common in new DeFi protocols and meme coins where anonymous developers launch a project, build hype to attract investors, then disappear with the funds. They are responsible for billions in losses annually.
Example
In a typical rug pull: An anonymous team launches "SuperYield Finance," promising 1000% APY. They attract $5M in liquidity from excited retail investors. The developers control 90% of the token supply. At a price peak, they sell all their tokens simultaneously, crashing the price 99%, and drain the liquidity pool. The website goes offline. The team disappears. Investors are left with worthless tokens and no recourse.
Related Terms
Frequently Asked Question
What is a rug pull?
A rug pull is a crypto exit scam where developers drain liquidity or sell insider tokens, crashing the price and stealing investor funds. Anonymous teams, unrealistic yields, and unaudited contracts are major red flags.
APA Citation
Last updated:
· Source: VixShield Trading Glossary — From SPX Mastery by Russell Clark
⚠️ Not financial advice. This definition is educational content from the SPX Mastery book series by Russell Clark (VixShield). Past performance is not indicative of future results. Trading options involves substantial risk of loss and is not appropriate for all investors. Always paper trade before risking real capital.