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You can catch most rug pulls in about ten minutes, before you spend anything. Check five things: that the token can be sold, that the liquidity is locked, what the contract's owner is still allowed to do, who holds the supply, and what the wallet that launched it did before. None of it needs coding. It needs a block explorer, a free scanner, and the patience to look before the chart gets you excited.
What is rug pulling?
A rug pull is when the people behind a token take the buyers' money and leave. Chainalysis counted $2.8 billion taken this way in 2021. That was 37% of all crypto scam revenue that year, up from 1% the year before. It comes in three main forms.
| Type | How it works | What you see |
|---|---|---|
| Liquidity pull | The team takes out the pool of money that lets the token trade | The price falls to almost nothing in one move |
| Honeypot | The contract lets you buy and blocks you from selling | A chart that only goes up. Then your sell fails |
| Dump | Insiders hold most of the supply, or mint more, and sell into your buying | A slow bleed, or one wall of selling |
The liquidity pull is the classic. In October 2021 AnubisDAO raised about $58 million in a day from buyers who had a Discord channel and a dog logo to go on. It had no website. Around twenty hours in, the money left the pool. If "pool" is a new word, our guide to how liquidity pools work covers it.
I bought my first Bitcoin in 2011. The tools have changed a great deal since. People still lose money the same way: they buy first and look second.
How to spot a rug pull in crypto: five checks
You need the token's contract address. Get it from the project's own website or its CoinGecko page, never from a Telegram message. Scammers launch copies with the same name and ticker.
1. Can you sell it?
Paste the address into Honeypot.is. It simulates a buy and a sell and reports the tax on each. If the sell fails, stop there. If it passes, still make your first purchase small and sell part of it straight away. A sell tax of 10% or more is a warning. Some contracts let the owner raise that tax later, all the way to 100%, which turns an ordinary token into a honeypot after you're in.
2. Is the liquidity locked?
When a token launches on a decentralised exchange, whoever adds the trading pool gets LP tokens. They're a receipt that lets the holder take the money back out. If those sit in the team's own wallet, the team can empty the pool whenever it likes. Look for LP tokens that have been burned, or locked in a service such as UNCX or Team Finance, and read the unlock date. A lock that expires in two weeks protects you for two weeks.
3. What can the owner still do?
Open the contract on the block explorer: Etherscan for Ethereum, BscScan for BNB Chain, Solscan for Solana. Is the code verified, meaning published and readable? Unverified code on a token that holds real money is a no. Then look at the owner's powers. Can they mint new tokens, blacklist wallets, pause trading or change the tax? On Solana the equivalents are the mint authority and the freeze authority, and both should be revoked.
"Ownership renounced" removes most of those powers on a simple contract. It removes nothing if the contract is a proxy, because a proxy can be pointed at new code.
4. Who holds the supply?
The explorer's Holders tab lists the biggest wallets. Set aside the burn address, the exchange pool and any locker. A rough rule: if the ten largest real wallets hold more than about a fifth of the supply between them, a handful of people can sink the price by selling. Watch for clusters too. Twenty wallets funded from the same source in the same hour are one holder. Team tokens that unlock on a schedule are a separate risk, covered in our guide to token unlocks.
5. Who launched it?
Every token has a deployer, the wallet that created the contract. Click through to it. Look at what else it has created and what became of those tokens. A wallet with four dead tokens behind it is about to make a fifth. A fresh wallet funded through a mixer an hour before launch tells you the team planned to be hard to find.
| Check | Where to look | Red flag |
|---|---|---|
| 1. Can you sell | Honeypot.is, then a small test sell | Sell fails, or the tax is 10% and up |
| 2. Liquidity | DEX Screener, the locker's own site | LP tokens in the team's wallet, or a short lock |
| 3. Owner powers | The contract page on the block explorer | Unverified code. Mint, blacklist or tax controls |
| 4. Holders | The Holders tab | A few wallets hold a fifth or more |
| 5. Deployer | The creator wallet's history | Dead tokens behind it, or funded through a mixer |
Rug pull checkers: what they catch and what they miss
Free scanners run most of these checks in seconds. Token Sniffer and GoPlus cover Ethereum-style chains. RugCheck covers Solana. DEX Screener shows the pool, its age and how much money is in it. Use two of them, because they disagree more often than you'd expect.
They read code and wallets. They can't read intent. A team that holds its tokens in the open, passes every scan, sells the lot over three months and stops posting has taken your money just the same. No scanner flags that. The slower checks do: team, treasury and real usage, all in our due diligence checklist.
How to avoid a rug pull on a meme coin
On launchpads where anyone can create a token in a minute for a few dollars, the great majority go nowhere. The five checks still apply, but speed works against you. If you don't have time to run them, you don't have time to buy. Count anything you put in as already spent.
Is a rug pull illegal?
Often, yes. In March 2022 US prosecutors charged the two men behind the Frosties NFT project with wire fraud and money laundering, after they took about $1.1 million and shut the project down. But a charge isn't a refund, and most rug pulls are small, anonymous and run from another country.
If it happens to you in the US, report it to the FBI's Internet Crime Complaint Center at ic3.gov. Then ignore every message offering to recover your funds for a fee. A recovery service that contacts you first is a second scam, aimed at people who have just lost money.
