There are various types of scams in the crypto world. Why? Because it’s unregulated, but that’s what makes crypto so desirable/successful. In this FAQ section, we will be revealing to our readers what a rug pull scam is and how you can reduce your risk with a little research.
Like all scams in the crypto world, if you have a checklist you can greatly reduce the chances of your investment getting the rug pulled.
How Does A Rug Pull Work?
Not all token owners set out to pull the rug on its investors, although some set out with plans to pull the rug out when the token is ripe. A rug pull will drain the majority of funds you have invested in a token (
- Someone sets up a token
- Anyone can set up a token on these big blockchains
- Setup a website, Telegram and Twitter
- Shill your pages and website for the big release
- Build enough support maybe user Fiverr to buy followers and Telegram user
- This makes the scam seem legit for other potential investors
- Make wild claims in your Telegram channel such as exchange listings and other important milestones
- Wait for the investors to start buying tokens
- When the scammer thinks they have made the most from investors they pull the rug from under your feet
- The scammer has withdrawn all funds reducing your token value to junk levels
- When investors login and check their tokens progress they will be presented with a drastic value reduction
That is the rug pull scam that seems to happen more times than people think.
How To Avoid Rug Pull Scams?
Before even thinking about investing in a new token you must research. These blockchains will not care if you lose all your money, they just keep allowing these scams. It’s your responsibility to double-check the token and determine if the token could be a rug pull.
Here is a checklist we like to use here at Crypto Enabler, but remember you can never be certain you are investing into a rug pull, so never invest any more than you would be comfortable losing.
- Check the website and WHOIS for who owns the site
- Double-check where the domain is hosted
- How long have the social networks been active?
- How many followers or members do the groups have?
- Invest ONLY in established tokens that have a real person involved
There is no way to be sure when it comes to a rug pull, these tokens are very risky but also very profitable if you get in at the right time. Because the crypto world tends to be more anonymous and lacking in regulations scammers have flocked to these blockchains without any risk of a comeback if they do pull the rug from under their investor’s feet.