Rug Pull
By Menno — 13 years in crypto, 3 bear markets survived, zero paid promotions
Last updated: March 2026
A rug pull is a crypto scam where project developers abandon the project and steal investor funds — typically by draining liquidity pools, selling massive token allocations, or disabling selling functionality.
A rug pull is a type of exit scam in crypto where project creators collect investor money through a token sale or liquidity pool, then disappear with the funds.
Types of rug pulls: - Liquidity pull: developers remove all liquidity from a DEX pool, making the token untradeable - Sell-off: team dumps their large token allocation, crashing the price to near zero - Honeypot: token contract allows buying but prevents selling (investors can't exit) - Slow rug: gradual extraction of funds through hidden mechanisms or inflated expenses
Red flags to watch for: - Anonymous team with no verifiable identity - Unrealistic returns or promises - No audit of the smart contract - Team holds a large percentage of token supply - Locked liquidity is missing or short-term - Copied/forked code with no innovation - Aggressive marketing with no working product
How to protect yourself: - Research the team thoroughly - Check for smart contract audits - Verify liquidity is locked for a meaningful period - Be skeptical of tokens promoted by influencers - Use Alpha Factory's Scam Check tool to analyze red flags
If something seems too good to be true in crypto, it almost certainly is.
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Related Terms
Tokenomics
Tokenomics is the economic design of a cryptocurrency — including total supply, distribution, emission schedule, burning mechanisms, and utility. Good tokenomics align incentives between the project and its investors.
DEX (Decentralized Exchange)
A DEX is a cryptocurrency exchange that operates on a blockchain without a central authority. Users trade directly from their wallets using smart contracts, maintaining custody of their funds. Examples include Uniswap, Jupiter, and Raydium.
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