Soft Rug Pull: A New Toxic Trend Behind The NFT Industry's Closed Doors (2024)

FAQs

Is soft rug pulling illegal? ›

Hard rug pulls, where developers code malicious backdoors into their tokens, are illegal. Soft rug pulls, where developers dump their crypto assets quickly, are unethical but not always illegal. However, fraudulent activities in the crypto industry, including rug pulls, can be challenging to track and prosecute.

A rug pull is a scam where a cryptocurrency or NFT developer hypes a project to attract investor money, only to suddenly shut down or disappear, taking investor assets with them. The name comes from the idiom “to pull the rug out” from under someone, leaving the victim off-balance and scrambling.

Soft rug pulls are a common type of scam in the cryptocurrency space. Unlike hard rug pulls, which involve malicious code or exploits, soft rug pulls are solely social engineering attacks. Scammers create a token and persuade users to buy it, often using hype and false promises of high returns.

Second, if you are caught in a rug pull and know who the culprits are, you can potentially hold them accountable if you can prove that they: i) misrepresented the aims of the project; and/or ii) never intended to deliver on their promises.

Identifying and avoiding rug pulls requires a combination of diligence and caution. Here's how you can protect yourself: Thorough research: Investigate the project's team, technology, goals, and community before investing. Look for red flags such as unknown teams or lack of transparency.

Bad faith actors launch projects, shill the token, and then disappear with investor funds. Common kinds of rug pulls include pump and dumps, liquidity pulls, and limiting sell orders. Red flags for rug pulls include extensive marketing, absent development plans, skyrocketing values, and unrealistic returns.

Examples of rug pull cases include OneCoin and Thodex, with billions lost, these real world examples underscore the urgency to investors to carry out robust due diligence before investing in a project.

A rug pull in the crypto industry is when a development team suddenly abandons a project and sells or removes all its liquidity. The name comes from the phrase to pull the rug out from under (someone), meaning to withdraw support unexpectedly.

Who owns NFT? ›

The ownership of an NFT is recorded in the blockchain and can be transferred by the owner, allowing NFTs to be sold and traded. NFTs can be created by anybody and require few or no coding skills to create. NFTs typically contain references to digital files such as artworks, photos, videos, and audio.

In a honeypot crypto scam, an attacker uses a cryptocurrency wallet, token, or smart contract to bait unsuspecting users into investing, transferring, or trading crypto tokens. Honeypot scams often bait investors with a sumptuous “pot of cryptocurrency” or the promise of substantial returns.

A: While recovering funds from a rug pull can be extremely challenging, it's not impossible. Reporting the scam to relevant authorities, gathering evidence, seeking community support, and consulting a specialized crypto lawyer may increase your chances of retrieving lost assets.

Last year was a lean one for crypto, but that didn't put an end to rug pulls. A report from Chainalysis today found that of all Ethereum ERC-20 tokens listed on DEXs in 2023, more than half met criteria for possible pump and dump schemes.

According to Hacken, crypto rug pulls made up the largest amount of exploits in crypto, accounting for more than 65% of all hacks in Q3 2023. The reason there are so many rug pulls on the market is that it's easy to create such schemes.

It used to be an offence to beat a carpet in the street under the Town Police Clauses Act 1847, but that provision was abolished a long time ago, along with many others which were no longer relevant to the modern world. Ever since 1839 it's been illegal to beat or shake a carpet in the street in London after 8am.

A dumping rug pull occurs when the creators of the token withhold a large amount of the circulating supply. Once the price of the token peaks - the creators quickly sell off their supply of tokens, the price of the token plummets, and investors are left with worthless tokens. It's also known as a pump-and-dump scheme.

Bad news for Londoners that need to beat their carpet or rug… it's actually illegal. As of 1839, beating or shaking any carpet or rug in the street in London is against the law. Doormats, however, are a different question. You're welcome to shake your doormat.

Start in a Corner With a Sharp Blade

If you can't find a seam, use your blade to cut into the carpet. Start in a corner and use a pair of pliers to pull the carpeting off the tack strips. You can pull with your hands if the carpeting comes up easily, but be careful of the tack strips, they are very sharp.