NFTs and Cryptocurrency Scams: What’s the Rug Pull?
At best, most Americans are skeptical of cryptocurrencies (the Pew Research Center recently reported that 63% of Americans lack confidence in the reliability and security of cryptocurrencies). But this has not stopped cryptocurrencies from becoming mainstream in the investment world, with the global market capitalization of cryptocurrencies set to jump 36% in 2024. So if you hope to join the ranks of the 562 million cryptocurrency owners around the world, it helps to be wary of scams and risks when investing. What is one of the biggest? Carpet pull.
Here, Spokeo takes a deep dive into what carpet pulls are, how they impact the industry as a whole, and how to avoid becoming a victim of carpet pulls.
What is Crypto Carpet Pull?
Since first entering the mainstream in 2018 (and since its launch around 2009), cryptocurrencies have become a core tool for online scam artists, especially in popular scams such as online and phone phishing, phishing, and identity theft. Scammers like to target cryptocurrency because it is difficult to trace; there is no central banking authority to flag suspicious transactions, and unlike most bank transfers, cryptocurrency transfers cannot be reversed. The problem is so widespread that consumers worldwide reportedly lost $2.2 billion to cryptocurrency scams in 2024, a 21% increase from 2021.
Despite their popularity, these everyday scams are not cryptocurrency scams, but scams rely on many of the same elements—namely, cryptocurrency’s lack of traceability and centralized accountability.
In a crypto pull, an individual or group accumulates assets from the public by selling tokens (which are the digital representation of a crypto asset—the “currency” in crypto), often promising huge returns on investment or even exclusive rewards and other investment incentives. Once they have acquired a large amount of assets from these token investments, they suddenly shut down the project completely and disappear from public view at the same time, often “coincidentally”. Of course, this leaves them with a big bag of money and the victim with nothing but a bunch of worthless tokens. The rug was quickly pulled out from under them.
Types of encrypted carpet handles
Cryptocurrency carpet pulling generally follows the same rhythm of “collect the assets and unceremoniously bail them out,” but it does differ in terms of execution. Cryptocurrency rug-pulling usually falls into one of the following categories:
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this team exit Probably the most well-known type of crypto carpet pull. Here, the team behind the token garners support and investment, then disappears from the map, leaving investors with a worthless token.
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Likewise, the pull of some cryptocurrencies revolves entirely around fake project None of this comes to fruition until the creator escapes with the bag.
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this pump and dump This tactic occurs when scammers artificially inflate the price of a token by coordinating purchases, and then coordinate a massive sale at a spike that causes the token’s value to plummet. This is also called Token dumping.
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liquidity pull Be more detailed. Here, fraudsters drained the liquidity of the token pool, deliberately causing the token’s value to plummet due to lack of interest.
In NFT space
For those unfamiliar, NFT stands for non-fungible tokens, which are digital assets such as visual art, videos, and other content that are tokenized via the blockchain. More simply, they are digital assets with a unique identifier. However, by 2025, you don’t have to worry too much about the appeal of the NFT carpet, unless you are floating in some fairly niche areas, with market penetration expected to be as high as 0.15% and stable.
That said, NFT carpet pulling works slightly differently than cryptocurrency carpet pulling: NFT developers often promote a project under false pretenses until they attract a horde of investors to sell the project’s assets. Whether it is a newly developed NFT or an existing NFT, developers will make misleading claims about their value or potential with the goal of deliberately selling low- or worthless tokens at high prices.
Another, less common type of NFT carpet pulling occurs when bad actors intentionally sell tokens that have already been minted (meaning their ownership has already been established) to unsuspecting buyers.
(center) The famous carpet handle
Because crypto carpet pulls rely on investors raising assets—and because they are most effective when they gain the undue trust of investors—these scams often involve public figures. This is why so many scammers have fled the cryptocurrency community and made mainstream headlines. Well, that and the huge toll some people take on their victims.
Eagle Coin
Okay, let’s get this out of the way. We know no one wants to hear the words “Hawk” or “Tuah” again, but this is perhaps the most famous example of a cryptocurrency pull, and also happens to be one of the neatest and most textbook examples of scams.
In 2024, “Hawk Tuah” meme Haliey Welch capitalized on her sudden popularity by launching a meme coin called “Hawk.” She promoted it all the way to a market cap of $490 million, and then the token lost 95% of its value in a matter of hours. Welch, of course, then went completely anonymous.
Squid Token
Likewise, in 2021, unknown Korean developers launched the Squid token, which was informally themed around the Netflix hit “Squid Game.” When the price per coin reached $2,861, the team’s website magically disappeared and the team could not be reached.
Todex
Also in 2021, Thodex founder Faruk Özer took a total of $2.6 billion worth of investment funds from 400,000 users and then fled to Albania, claiming that the money was lost in a cyberattack.
Ethereum largest
Speaking of more celebrity-driven pull, Kim Kardashian hyped Ethereum Max to her over 220 million Instagram followers, as well as other celebrities like Floyd Mayweather. She bluntly stated that the EthereumMax team burned 40 trillion tokens to increase its value as a way to “give back to the community.”
The token’s value dropped 97% in six months, and Kim was fined $1.26 million (for her) by the SEC just for failing to label her posts as ads.
How to stay away from scams
{Note: This article is not intended as investment advice, but to help you identify potential scams. }
Entering a (relatively) young investment space known for its lack of regulation and governing bodies, which is a core part of cryptocurrency’s decentralized appeal, inherently carries certain risks. But as is always the case, risks can be minimized with appropriate expertise. Whether you’re considering investing for the first time or you’ve been exposed to blockchain a few times, keep these tips in mind:
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forever, forever, forever do your research Before investing in any coin. looking for transparency And the track record of the team behind it. Avoid anonymous developersif you plan to add cryptocurrencies to your portfolio, stay informed and participate in what’s going on in the cryptocurrency community.
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Likewise, try to get Audit report Obtain from a third party before you invest any funds, especially if the token is from a newer or lesser-known developer.
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Check the token Liquidity Through a white paper or smart contract. Confirmation that funds are locked for a reasonable window is a green flag; loopholes Giving developers the ability to withdraw funds without any warning is a big red flag.
If you’re unsure about a coin in any way, shape, or form, avoid investing entirely, or at least start with a small amount of cryptocurrency before jumping head-on to minimize potential losses. We probably don’t need to tell you this, but if there’s one thing you take away from the past crypto rug, it’s this: Don’t be seduced by paid promises from influencers or celebrities promoting coins. Someone who is known for making crude jokes on the Internet may not be your best financial advisor.
You can also use the people search tool to find public information about cryptocurrency developers, promoters or influencers. This is one way to add an extra layer of due diligence.
this story is made of Spook and reviewed and distributed by stacker crane.