Rug Pulls: How They Work
Developers build hype, attract investment, then withdraw liquidity or dump their holdings — leaving investors with tokens they cannot sell. This page explains the mechanism; we do not label individual assets as rug pulls, because it is not something price and volume data can establish.
How it works
The team either removes the liquidity backing the token on a decentralised exchange, or sells a large insider allocation into the market at once. Either way the price collapses and holders have no exit.
Red flags to look for
- ⚠Anonymous or pseudonymous team with no verifiable history
- ⚠No audit from a reputable smart contract security firm
- ⚠Unlocked or very short vesting on team/dev tokens
- ⚠Contract contains hidden mint or pause functions
- ⚠Price collapsed 90%+ with near-zero remaining volume
Frequently asked questions
What is rug pull in crypto?
Developers build hype, attract investment, then withdraw liquidity or dump their holdings — leaving investors with tokens they cannot sell. This page explains the mechanism; we do not label individual assets as rug pulls, because it is not something price and volume data can establish. The team either removes the liquidity backing the token on a decentralised exchange, or sells a large insider allocation into the market at once. Either way the price collapses and holders have no exit.
How does FraudCoins detect rug pull?
Our automated scan runs daily against public market and on-chain data and applies the indicators listed on this page. Results are automated, opinion-based assessments — not statements of fact or allegations of wrongdoing.