What is “Ragpull” of crypto assets?[Basic knowledge]| CoinDesk JAPAN

Cryptocurrency lag pulls are sadly common, costing crypto investors billions of dollars in losses.

Here, what is the rag pull of crypto assets? How does it work? We will explain how to identify lag pull and how to avoid it.

What is Ragpull for crypto assets?

Ragpull is a type of exit scam in which a team raises money from investors or the general public by selling tokens, then either secretly closes down the project or suddenly disappears and takes away the raised funds and sells them to investors or the general public. The “house” (that is, the victim) is left with only a worthless token.

Ragpulls can be widely organized, with malicious actors leveraging social media influencers and hype campaigns to lure as many victims as possible.

Some even use socially trusted opinion leaders to gain trust. Others promise extremely high yields or offer exclusive NFT offerings, as seen in NFT rug pulls.

In other cases, project owners manipulate the value of certain tokens or coins to deceive investors and then siphon their investments.

Scammers often attract victims by rapidly increasing the value of their tokens in a short period of time. When the price peaks, the scammers sell the tokens and make a profit, leaving the “investors” with large losses.

Fraudulent transactions often take place on DEXs (decentralized exchanges), and fraudsters benefit from the pseudonym nature of DEXs.

Types of rug pulls

Rag pulls can generally be classified into two types: hard and soft.

hard rug pullis more sudden. Investors can lose all their money in a short period of time.soft lug pulloccurs over a longer period of time. Core development teams quietly disappear, giving investors a false sense of security.

Common rug pulls include:

• liquidity pull: Malicious actors remove liquidity from the token pool and the value of the token plummets due to lack of buyers and sellers.
• fake project: A scammer launches a seemingly solid project, collects investment, and then runs away with the funds, leaving investors with worthless tokens.
• pump and dump: Fraudsters artificially inflate the price of tokens through organized buying, then sell their holdings at peak times, causing the value to plummet.
• team leaving: When a project team member suddenly disappears or leaves, investors receive no support and the token collapses.

How to recognize and avoid lag pull

Identifying and avoiding lag pulls requires a combination of diligence and prudence. Here's how you can protect yourself.

• thorough research: Research a project's team, technology, goals, and community before investing. Be on the lookout for red flags, such as unknown teams or lack of transparency.
• security audit: Reliable projects often undergo security audits by third parties. Find out if your project has been audited and review the audit report for vulnerabilities.
• Community engagement: Join the project community on social media and forums. A strong and active community is a sign of a legitimate project.
• warning sign: Beware of unrealistic returns and yields, excessive marketing, and pressure to invest quickly. Trust your instincts and don't give in to FOMO (Fear of Missing Out).

Finally, always invest only money you can afford to lose. Many crypto projects are experimental, and failure of an idea can lead to a team doing a soft lag pull, or quietly ceasing support for the project.

5 largest rug pulls

Cryptocurrency rug pulls have always attracted the attention of the industry, but a few have left their mark on the industry. Here, let's take a look back at five of the largest crypto asset lag pulls in the history of crypto assets.

OneCoin

OneCoin was a cryptocurrency-based Ponzi scheme that was touted as a new digital currency that would revolutionize the financial industry.

The scheme was hatched by Ruja Ignatova and claimed that OneCoin was backed by a team of experts and had a vast network of distributors.

However, OneCoin was never actually backed by anything, and distributors were simply paid to recruit new investors. When the scheme ultimately collapsed, investors lost more than $4 billion (approximately 588 billion yen, equivalent to 147 yen to the dollar).

Thodex

Thodex is a Turkish cryptocurrency exchange that was hacked in 2021. Hackers stole $2 billion worth of crypto assets from Todex users, and the exchange's founder Faruk Özer has since disappeared. Ozer was later arrested in Albania in 2022.

AnubisDAO

AnubisDAO is a DeFi project launched in 2021. It promised high returns to investors, but it was a lag pull. Developers dried up the project's liquidity pool and disappeared, leaving investors with nothing.

Uranium Finance

Uranium Finance, a DeFi project that promised to give investors exposure to uranium mining, was also a rug pull.

The developers of Uranium Finance have disappeared, depleting the project's liquidity pool and leaving token holders with heavy losses.

squid game token

The Squid Game Token was a scam crypto asset created in 2021 that was inspired by the popular Netflix series “Squid Game.” The developers disabled the token sales feature and ran away with investors' funds.

Crypto lag pull remains a major threat, preying on unsuspecting investors and causing large financial losses.

By understanding the different types of lag pulls, learning how to spot early red flags, and following investment best practices, you can significantly reduce your risk of falling victim to these unscrupulous schemes.

｜Translation and editing: Akiko Yamaguchi, Takayuki Masuda
｜Image: Shutterstock
｜Original text: Crypto Rug Pulls: What Are They & How to Avoid Them