A rug pull is a scam where a token's creators attract buyers, then abruptly remove the liquidity or dump their holdings, leaving everyone else with tokens that cannot be sold. From pulling a rug out from under someone comes the name. Examining 388,000 liquidity pools on Solana, Solidus Labs found roughly 93% showed soft rug pull characteristics.
How a rug pull works
Where the token trades determines the mechanics, and most trade on decentralized exchanges.
On a decentralized exchange, a token's price comes from a liquidity pool holding reserves of that token and a paired asset like ETH or SOL. Whoever created the pool typically controls it.
Across thousands of cases, the sequence is consistent.
- Creators launch a token and seed a pool with some of the token and some paired asset.
- Marketing generates buyers, whose paired asset flows into the pool.
- Once enough has accumulated, creators withdraw the paired asset from the pool.
- The pool now holds only the worthless token. Nobody can sell.
Within hours, the whole thing can be over. According to data cited by Memeburn, 68.67% of tokens launched on Pump.fun survived less than 24 hours.
Hard vs soft rug pulls
| Hard rug pull | Soft rug pull | |
|---|---|---|
| Method | Liquidity withdrawn or contract code drains buyers | Creators gradually sell a large pre-allocated holding |
| Speed | Minutes to hours | Days to weeks |
| Legality | Fraud in most jurisdictions | Frequently legal, since the tokens were theirs to sell |
| Detectability in advance | Unlocked liquidity, malicious code | Concentrated supply, no vesting |
| Share of cases | Minority | Majority |
More common and harder to prosecute is the soft rug pull. Technically, nothing was stolen. The team sold tokens they legitimately owned into a market they had marketed into existence.
Honeypots, mint functions, and other scam variants
Liquidity removal. The classic form. Whoever holds the liquidity pool tokens withdraws the paired asset.
Honeypot contracts. The token's code allows buying and blocks selling, or lets only the creator's address sell. Buyers discover this when they try to exit.
Mint functions. The contract lets creators mint unlimited new tokens, which they dump into the pool.
Hidden fees. Code that charges a large tax on every sale, routed to the creator.
Team dumps. A large allocation held by insiders, sold into the demand their marketing created.
Warning signs: unlocked liquidity and concentrated supply
Most rug pulls are detectable in advance, because the setup requires specific conditions.
- Unlocked liquidity. If the pool tokens are not locked in a time-locked contract, the pool can be drained at any moment. This is the single clearest signal.
- Concentrated supply. Top ten wallets holding more than 20% of supply, excluding burn addresses, means a small group can end the project by selling.
- Anonymous team with no verifiable history.
- No audit, or an audit summary the project publishes without the auditor's own report.
- Renounced ownership claims that do not hold up when checked on a block explorer.
- Mint function present in the contract code.
- Urgency and hype, with coordinated promotion across accounts and no substance behind it.
- A whitepaper you can find identical passages of elsewhere.
How to check a token before buying
- Look at the liquidity lock. Public tools show whether pool tokens are locked and for how long.
- Read the holder distribution on a block explorer.
- Check the contract for mint functions, sale restrictions, and hidden fees. Automated scanners flag common patterns.
- Send a tiny test transaction and confirm you can sell it back. A honeypot fails this test.
- Compare the audit report on the auditor's site against what the project claims.
- Ask what the token does. A project that cannot answer has already told you something.
None of that guarantees safety. What it does is filter out the majority of setups.
Why victims rarely recover their funds
Almost nothing, in practice.
On-chain, moved funds are irreversible. Frequently anonymous and in other jurisdictions, creators are hard to reach. Soft rug pulls may not even be illegal. Law enforcement action exists but is slow, and recovery is rare.
Hence why prevention carries the entire weight. No fraud department exists.
Where mb.io fits
Where anyone can list anything, rug pulls happen. Reviewing assets before listing them removes the setup.
mb.io is a regulated crypto spot exchange backed by MultiBank Group, a financial institution founded in 2005 that serves more than 2 million clients across 100+ countries.
- Every listed asset is reviewed before it reaches the platform
- Regulated by VARA in the UAE and AUSTRAC in Australia
- 10/10 security score from Hacken, an independent blockchain security auditor
- Institutional-grade MPC custody powered by Fireblocks, with segregated client funds
- Buy, sell, and swap in three steps, from sign-up to purchase
- 24/7 multilingual client support
Open your account and start trading on mb.io.
Frequently asked questions
What is a rug pull in crypto?
A scam where a token's creators attract buyers, then withdraw the liquidity or dump their holdings, leaving remaining holders unable to sell. From pulling a rug out from under someone comes the name.
How common are rug pulls?
Very. Solidus Labs found roughly 93% of 388,000 Solana liquidity pools showed soft rug pull characteristics, and 68.67% of Pump.fun tokens survived less than 24 hours.
What is the difference between a hard and soft rug pull?
Removing liquidity or using malicious code to drain buyers, usually within hours, is a hard rug pull. Having insiders gradually sell a large pre-allocated holding over days or weeks, which is frequently legal, is a soft one.
How do I spot a rug pull?
Check whether liquidity is locked, whether supply is concentrated in a few wallets, whether the contract has a mint function, and whether you can sell a small test amount. Unlocked liquidity is the clearest single warning.
Can I get my money back after a rug pull?
Rarely. On-chain transactions are irreversible, creators are often anonymous, and soft rug pulls may not be illegal. Almost all the weight falls on prevention.
What is a honeypot token?
A token whose contract allows buying but blocks selling, or permits only the creator to sell. Buying a small test amount and trying to sell it back exposes it.
Is a rug pull illegal?
A hard rug pull involving liquidity theft or malicious code is fraud in most jurisdictions. A soft rug pull, where insiders sell tokens they legitimately own, frequently is not, which is part of why it is the more common form.
Do rug pulls happen on centralized exchanges?
Rarely, because listed assets go through a review process. On decentralized exchanges and launchpads, where anyone can create a pool for any token instantly, rug pulls concentrate.
