What is the rug pull in NFT and Crypto? According to PCmag, a rug pull is a scam promotion of a crypto token via social media. After the price has been driven up, the scammer sells, and the price generally falls to zero. In 2021, a rumor spread about a “real” rug pull of an NFT. On the blockchain, NFTs (non-fungible tokens) are links to the digital art stored somewhere else. Someone located the whereabouts of a file and changed its contents to an image of a rug. A rug pull that left a rug!
Now you understand what does rug pull means in NFT. Below we have reviewed and described the most recently mentioned crypto rug pulls that you should know about in order to avoid being scammed. Let’s start!
The largest NFT rug pulls
Over the past few months, NFT rug pulls have been a popular way of scamming people out of their money, as many scammers have seen immense success doing this. Here are some of the most recent and most talked about NFT rug pulls:
- Frosties – the first NFT scam in 2022. Frosties, which had become the latest star of the NFT world as 2022 began, just as quickly became the year’s most notable scam. It was a rug pull, a trick where creators of a cryptocurrency or an NFT artwork or game abruptly shut down the project, make away with the project funds and disappear. Along with the money went the trust and goodwill essential to getting a project merging new forms of art and finance off the ground. Rug pulls have become a major form of crypto fraud, making up nearly 40% of crypto scams and costing users about $2.8 billion last year, up from just 1% the previous year, according to Chainalysis.
- Blockverse. Blockverse is the latest NFT project to rug pull, raising questions on the authenticity of projects by anonymous developers. The project reportedly sold out in under eight minutes, generating 500 ETH. Unfortunately, the developers disappeared with the money, closing both the project’s website and Discord server. In fact, according to OpenSea, 4,200 users own the NFTs in the collection. Besides, it has generated 793 ETH (or around $1.9 million) in trading volume on the platform. Unfortunately, Blockverse NFT was nothing but a rug pull.
- Big Daddy Ape Club – the largest NFT rug pulls in the history of the Solana blockchain. In January 2022, scammers pulled off one of the largest NFT rug pulls in the history of the Solana blockchain. The scammers made off with 9,136 SOL, or around $1.3 million at the time, in funds sent by would-be collectors to mint “Big Daddy Ape Club” NFTs—except there were no NFTs. And the people behind the Big Daddy Ape Club were able to abscond with the funds despite the NFT drop having been “verified” by decentralized identity verification company Civic.
- Mercenary. To get more people interested, the Mercenary scammers sponsored advertising on Twitter with crypto news outlets like BSC News. However, it was all a hoax. A business that records rug pulls and other fraud in the crypto industry, the scammers behind Mercenary Gold got away with at least $760,000. Mercenary’s social media accounts have been deleted, and even cached versions on Google Cache and the Internet Archive appear to be empty. However, the game has a lengthy history of paid marketing on Twitter. And as a fun attraction, its 8-bit aesthetic looked quite realistic. Regrettably, it turned out to be a complete scam.
- Kingfund Finance. Kingfund Finance suddenly drained more than 300 WBNB (about $141,000) from their project. This happened a few days after users began to report being blocked by the project’s Twitter account and kicked from its Telegram channel for reporting issues with unavailable funds, apparently an attempt to buy time as they prepared for their exit. Around the time of the rug pull, they took their Twitter and website offline.
- Evolved Apes and Baller Ape Club. Riding on the coattails of the popular NFT collection Bored Ape Yacht Club, these two ape-themed NFTs made off with a total of roughly $4.7 million worth of ETH and SOL, with Evolved Apes disappearing with $2.7 million of that. It is important to note that both Evolved Apes and Baller Ape Club started off like any normal project — with a team, community, and investors. Although people who fell victim to these scams admit they noticed red flags throughout the project, they claimed they were blinded by the potential they saw and ignored them. Evolved Apes creator “Evil Ape” not only duped the community supporting him, but even the artist behind the entire collection. Evil Ape erased his tracks after the official public mint by deleting all the Evolved Apes social media platforms, and leaving behind the unerasable blockchain history of the 798 ETH transferred to him
- SolGame. In January, 2022, Twitter user by the name of Millesimal reported he had lost his money on Solgame after the official website, solgame.org, was shut down and the Discord channel deleted. The user managed to track down the developer, but there isn’t much information on either his whereabouts or his persona.
- Swipathefox. Sacramento Kings guard De’Aaron Fox yanked the rug from under his “Swipathefox” NFT project, raking in over $1.5 million in profits while leaving holders in the dust. De’Aaron Fox launched this “Swipathefox” Project in December 2021, where there would be 6,000 unique fox-like characters minted on the Ethereum blockchain and supported by the Opensea secondary marketplace. The project originally offered giveaways, exclusive chats with De’Aaron, and more just for owning one of these digital collectibles (which cost $400 each)
- Eternal Beings. After shilling the Solana NFT’s on Twitter to his 8 million followers, the collection of 11,111 “generative alien avatars” sold out and Uzi immediately deleted his posts and never touched the project again. The 43,000 strong Discord server panicked, and their panic was warranted. It was a “social rug“, and following this, the price tanked for Eternal Beings. They were minted at 2.5 SOL each, and Uzi put himself in hot water by tweeting that they will “easily” surpass 6 SOL. They have been trading at ~0.13 SOL ever since. The project hasn’t tweeted since a few days after Uzi rugged his socials. According to their “roadmap”, Uzi was supposed to do a live performance for Eternal Beings with backstage access for one holder. That hasn’t happened as you may have guessed
Read also: How to buy an NFT
How to avoid being scammed?
Check the team
Checking links and establishing the credibility of the developers is very important. Checking to see that a token locks a large amount of liquidity, for a long period of time, is a great sign. Developers won’t be able to rug pull if the vast majority of liquidity is locked.
Low liquidity – say the US $100,000 or less – can very easily be manipulated and should be considered a huge red flag. This also suggests the developers have little money to put into the project.
Whitepaper explaining the problems that a token is looking to solve should be looked at before making an investment. If the whitepaper appears more like an advertisement and is less than roughly twenty pages, this is a prominent red flag. The whitepaper should detail the currency’s use cases while including graphs and charts. An unprofessional white paper is a huge warning sign.
Use blockchain explorers (e.g. etherscan.io), to check percentage ownership for a specific project.
By finding the tokens’ contract address and plugging it into a blockchain explorer, you will be able to see information like top holders by percent, market cap, and circulating supply.
A project with a high APR (annual rate of interest paid on investment) may be a red flag; if the tokenomics appear to be too good to be true then it may actually be a scam. Very high percentages should arouse suspicion.
Research the community
Are there any well-known people, or a community of crypto enthusiasts? These people are usually more experienced and know what to look out for, so they may have a better idea of what is going on. Don’t fall for big numbers, make sure the engagement is from real people who know their stuff!
Only mint on official websites
Don’t go on any link provided by the creators unless it is a website like OpenSea or Mintable. Although these are not the only two safe websites to mint NFTs on, make sure to research the website before you buy!
Look at the roadmap
Make sure the roadmap is realistic. Many rug pull schemes include an exciting roadmap to get the community fired up, but aside from the fact that they won’t actually happen, they are often too difficult to execute.