What is a rug pull?

A rug pull describes schemes where project insiders take funds or remove liquidity at participants' expense. In token markets, insiders may drain the trading pool. In NFT projects, they may collect sale proceeds and abandon the work they promised.

A failed project or sharp price decline is not automatically a rug pull. Fund movements, control rights, promises and evidence of intent matter. A price chart alone is insufficient to accuse a real person or project of fraud.

Example

A hypothetical team sells 500 NFTs at 0.02 ETH each to finance a game, raising 10 ETH before fees. It transfers the funds earmarked for development to personal wallets, closes its communication channels and never builds the game. Taking the funds and abandoning the promised work raises rug-pull concerns. The NFT price merely falling from 0.02 ETH to 0.01 ETH would not establish the same facts.

Having a smart contract is not a guarantee. The powers granted by the code and the team's off-chain commitments must be evaluated separately.

The NFT buying checklist sets out checks for contracts, licenses and project promises; completing them cannot eliminate fraud risk.