Cryptocurrencies have caused a paradigm shift, promising decentralisation, financial freedom, and unimaginable wealth. However, alongside the opportunities lie the risks, and one of the most treacherous pitfalls in the crypto space has been the infamous “rug pulls.”
In this article, we take a look at some of the biggest rug pulls in crypto history, where unsuspecting investors fell victim to deceitful schemes that left them empty-handed.
What is a rug pull?
Before we take a look at the most notable rug pulls, let’s first gain an understanding of what a rug pull actually entails. In the crypto space, a rug pull refers to a fraudulent act where the creators or insiders of a project abruptly abandon it, taking off with investors’ funds. These deceitful actors often use enticing marketing strategies, promising high returns or innovative technologies to attract unsuspecting investors. Once the funds are pooled in, the rug is pulled, and investors are left with worthless tokens, often unable to trace or recover their investments.
OneCoin
OneCoin stands as one of the most notorious rug pulls in crypto history. Launched in 2014 by Ruja Ignatova↗︎, OneCoin amassed a massive following by promoting itself as a revolutionary cryptocurrency poised to surpass Bitcoin. However, investigations revealed that OneCoin operated as a multi-billion-dollar Ponzi scheme, swindling investors out of an estimated $4.4 billion. Ignatova and her associates used deceptive marketing tactics, manipulated their token’s value, and created a mirage of success to lure in unsuspecting victims. Despite ongoing investigations, Ruja Ignatova remains at large.
Thodex
In 2021, Thodex↗︎, a Turkish cryptocurrency exchange, became embroiled in a rug pull scandal that sent shockwaves through the crypto community. Thodex, led by its founder Faruk Fatih Özer↗︎, abruptly shut down its operations, leaving investors unable to access their funds. It was estimated that the exchange held over $2.5 billion in users’ assets, and Özer himself vanished, sparking an international manhunt. He was later found in Albania and extradited where he faced charges in Turkey.
AnubisDAO
AnubisDAO, an Ethereum-based decentralised autonomous organisation (DAO), made headlines in 2022 when it became a victim of a high-profile rug pull. The DAO aimed to provide a platform for community governance and investment opportunities in the NFT space. However, a malicious actor exploited a smart contract vulnerability, draining $60 million dollars↗︎ from the DAO’s funds.
Squid Game
Drawing inspiration from the popular Netflix series, the Squid Game token emerged as a rug pull project in 2021. Riding the wave of the show’s popularity, the creators launched the token, claiming to offer a decentralised gaming platform. However, soon after its launch, the project’s developers disappeared↗︎, leaving investors with worthless tokens. The creators cleaned out some $3.3 million in funds.
Uranium Finance
Uranium Finance, a decentralised finance (DeFi) project, experienced a devastating rug pull in 2021. The project promised high-yield farming opportunities, attracting a significant amount of capital. However, a vulnerability in its smart contract was exploited, resulting in a loss of approximately $50 million.
Meerkat Finance
In 2021, Meerkat Finance, a decentralised yield farming project, raised suspicions when it suddenly launched and then abruptly disappeared within hours. The developers claimed that a vulnerability had been discovered, and funds were being returned to investors. However, the community quickly realised that the incident was a rug pull, and $31 million dollars worth of cryptocurrency vanished.
Iron Finance
The Iron Finance rug pull occurred when the protocol’s native token, known as IRON, experienced a catastrophic collapse in value. The incident unfolded when the peg of IRON, which was supposed to be stable and pegged to the US dollar, suffered a severe breakdown, leading to a significant loss of funds. Investors were left reeling as the price of IRON plummeted dramatically, resulting in an estimated loss of millions of US dollars.
Takeaway
Rug pulls, the dark underbelly of crypto, continue to plague the space. The list above only scratches the surface, and it is regrettable to say that many more will likely follow until regulatory measures are implemented to tame the wild west nature of the sector.
These rug pulls serve as stark reminders of the potential pitfalls within the crypto space, emphasising the need for investors to exercise utmost caution. To navigate this perilous terrain successfully, thorough research and due diligence are essential, along with unwavering vigilance to safeguard one’s investments.
