Rug Pull Scams via Ethereum & Stablecoins
Project founders drain liquidity pools funded by investors' ETH and stablecoins after a coordinated hype campaign, leaving token holders with worthless assets.
Part of: Rug Pull Scams
Last reviewed: 1 June 2026
A rug pull occurs when the creators of a new DeFi token or NFT project suddenly withdraw all liquidity or mint reserved tokens and sell them, crashing the price to near zero. Investors who bought in with ETH or stablecoins are left holding tokens that cannot be sold for any meaningful amount.
Ethereum and stablecoins are the primary funding currencies for these schemes because they are easily deposited into liquidity pools on decentralised exchanges. The pseudonymous nature of the blockchain makes it straightforward for fraudsters to exit anonymously.
How this scam works on Ethereum & stablecoins
A new token is launched with slick marketing, a whitepaper, and promises of revolutionary utility. Founders use coordinated Telegram and Discord communities to drive FOMO-driven buying. Once the liquidity pool reaches a target value in USDC or ETH, the founders remove all liquidity in a single transaction, taking investor funds and leaving the token price at zero.
In some variants, the smart contract includes a hidden mint function allowing founders to print unlimited tokens and dump them. In others, a withdraw-only owner function is embedded that prevents anyone except the deployer from removing funds.
NFT rug pulls follow the same pattern: a hyped mint collects ETH from buyers, after which founders abandon the project and walk away with the proceeds.
Common red flags
- Anonymous or unverifiable team with no prior track record
- Smart contract not verified on a block explorer or not audited by a reputable firm
- Locked liquidity period is very short or liquidity is not locked at all
- Exaggerated promises of returns with no clear technical differentiation
- Community channels aggressively censor questions about tokenomics or the team
- Large percentage of token supply held by a single wallet
- Roadmap is vague and the project launched very recently
How to protect yourself
- Only invest in tokens whose smart contracts have been audited by a reputable, independent security firm
- Check whether liquidity is locked for a substantial period using a time-lock verifier
- Research the team's on-chain history and look for prior projects that failed or were abandoned
- Limit any single speculative position to an amount you can afford to lose entirely
- Use contract analysis tools to check for hidden owner privileges before buying
- Diversify across multiple assets rather than concentrating in a single new token
How to report it
- Report the project's contract address and social accounts to on-chain fraud databases and the platforms they used
- If the founders are identifiable, file a report with law enforcement including wallet addresses and transaction hashes
- Warn the community on relevant forums to prevent further victims
Frequently asked questions
Is a rug pull illegal?
In most jurisdictions, deliberately defrauding investors through a pre-planned liquidity withdrawal constitutes fraud. However, prosecutions are difficult when founders are anonymous and assets have been moved across multiple chains. Regulatory clarity around DeFi fraud is still developing.