A rug pull is a scam where the people behind a new crypto project collect money from buyers and then disappear with it, as if pulling the rug out from under them. The buyers are left holding a TokenTokenA digital asset created with a smart contract on another cryptocurrency's blockchain, rather than on a blockchain of its own. nobody wants to buy. Rug pulls are most common with new memecoinsMemecoinA cryptocurrency born from an internet joke or meme, usually with little or no practical use, whose price rests almost entirely on hype. and small projects.
How does a rug pull work?
Anyone can create a new token in a few minutes. The people behind it list it on a decentralised exchangeDecentralised exchange (DEX)An exchange run by smart contracts, where people swap crypto straight from their own wallets with no company in the middle. and put in funds so it can be traded. Then comes a social media campaign, often with promises of huge gains.
Once enough money has come in, they do one of three things:
- Drain the pool. They withdraw the funds they put in to provide LiquidityLiquidityHow easily an asset can be bought or sold quickly at a fair price, without the trade moving the price much., so nobody can sell.
- Sell everything at once. They hold a large share of the tokens and dump them in one go, so the price crashes.
- Block selling. The smart contract's code lets buyers buy but not sell.
A rug pull is related to a pump and dumpPump and dumpA scam in which the price of a small coin is hyped up so the organisers can sell high and leave others with the losses., which usually involves inflating the price of a coin that already exists.
Warning signs
- An anonymous team and no clear explanation of what the project does
- A few wallet addresses hold a large share of the tokens
- The price has shot up in just a few days
- Heavy pressure on social media to buy right now
- The smart contract's code hasn't been published or reviewed
If you have lost money in a rug pull, you can report it to the police through Ísland.is. Bear in mind that recovering crypto is hard, because the people behind it are often anonymous and based abroad.
Everything in Myntkaup Learn is written and regularly reviewed by the Myntkaup editorial team. It is for education and is not investment advice. Editorial policy. Updated 18 October 2026.