Crypto can be a daunting concept for many to understand. There are thousands of coins that exist across various blockchains, and not all of them are trustworthy. Many coins are created as scams, often called “Rugpulls” designed to steal your money. In fact, Rugpull scams alone have been responsible for over 2.8 Billion dollars in financial losses. So with these apparent threats, let's learn a bit more about Crypto Rugpulls so that you can keep your money safe.

A pump and dump scheme is a type of Rugpull scam in which the creators of a coin will bring awareness by “hyping up” the coin, often by spreading false information or unattainable promises. The “miracle coin” then lures in a large number of investors, who then buy up many of the available coins, making the ones left much rarer and valuable. Once the value of the coin is high enough, the creators of the coin will then proceed to sell off their share of the coins and disappear.

One of the most common types of Rugpulls, liquidity stealing happens when the creator of the coin designs their site in such a way that “allow[s] them privileged access to the locked funds upon exit”(Becher). Once the coin (a liquid asset) has reached the desired value, the developers leave the project, stealing all the liquid assets right out of the investor's pockets.

Although less common compared to the other two, limiting sell orders is certainly a prevalent and dangerous method of scamming investors. It occurs when “the developer codes the tokens so that they’re the only party that is able to sell them. Developers then wait for retail investors to buy into their new crypto using paired currencies”(Puggioni). This effectively funnels all of the real, functional tokens into the pocket of the developers while sticking investors with a useless coin that they can’t sell.