Rug Pull

A situation in which the developers of a project abandon it, often resulting in losses for investors.

A rug pull is a situation in which investors lose their funds because the people behind the investment are unable to pay back. The concept originated from the idea of pulling the rug from under someone, which is figurative for abandoning someone or doing the unexpected. Thus, a rug pull in crypto is similar to a Ponzi scheme. In both situations, the investment or development team usually disappears without prior notice, taking investors’ funds with them.

Rug pulls are somewhat common. One of the biggest rug pulls in crypto is the Squid Game rug pull which cheated around 43,000 investors out of their money.