5 “Worst” Rug-Pulls in Crypto

With the continued rise in popularity of cryptocurrencies, there has been an influx of new investors looking to get involved in the market. With that, scores scams and rug pulls have also cropped up in the space.

According to a 2022 report from blockchain risk monitoring firm Solidus Labs, more than 117,000 scam tokens were deployed in the year up until December, a 41% increase from 2021. As a matter of fact, 15 new scam tokens are detected every hour, and almost 2 million investors have lost funds to rug pulls.

What are Rug-Pulls?

Rug pulls are a type of crypto scam where a project's team or founder abandons the project and suddenly disappears, taking all of the invested funds with them and leaving investors high and dry. It is, of course, often done with little or no warning. This usually happens after a project has raised a lot of money.

Rug pulls are, unfortunately, all too common in the crypto world.  They can also be very difficult to spot before it's too late. That's why it's important to do your research before investing in any project and to be wary of any red flags.

If you think a rug pull might be happening, the best thing to do is to get out as soon as possible and cut your losses. When doing your research, do not rely on influencer endorsements either.

Recently, Coffeezilla (aka Stephen Findeisen), a YouTube investigator of crypto ‘scams,' published on Twitter that he tricked Bellator MMA fighter Dillon Danis into promoting a fake NFT project link that led fans to a web page detailing all of his past “scams.”

In a tweet, Coffeezilla revealed that he and his team paid Danis $1,000 to post about the project without disclosing that it was an advertisement – a stipulation enforced by the Securities and Exchange Commission (SEC). His post spelled out the word “scam” with the first letter of the last four words.

Coffeezilla's team gave Dannis a link to the post that would allow users to mint a new crypto project. However, instead, it took them to a website that reads, “Have you been scammed by Dillon Danis?” and showed Dillon's previous crypto projects that he promoted for money. The website also included graphs to illustrate how many of the Danis-backed projects tank in value soon after he tweets about them.

This goes on to show that you shouldn't blindly trust the crypto projects promoted by influencers as they are often paid to promote them, and their posts are not always accurate or impartial. It's important to do your own research before investing in any cryptocurrency and not rely on influencers' opinions.

Worst Rug-Pulls

Now, let's take a look at some of the worst rug pulls that can be seen in every area of the crypto sector.

1. OneCoin

The biggest cryptocurrency Ponzi scheme OneCoin, raised $4 billion and defrauded people of billions of dollars by promising investors returns on their crypto investments and pitching the company as a legitimate business.

OneCoin's Bulgaria founder Ruja Ignatova disappeared in October 2017 without a trace and is wanted by US authorities for fraud and conspiracy. She is currently the only woman on the FBI's Ten Most Wanted List and one of the 11 women that ever appeared on it. If convicted, she faces up to two decades in prison.

According to court documents, she tricked unsuspecting victims, whom she described as “dumb,” out of billions of dollars by claiming that OneCoin would be the ‘Bitcoin killer' while the company's primary business was selling course materials. The coin was not actively traded either, and there was no blockchain. Instead, the currency was based on an SQL server.

After Ignatova vanished, her brother, Konstantin Ignatov, took over control but was arrested in 2019 and eventually pleaded guilty to fraud and money laundering.

2. Thodex

Founded in 2017, Thodex was a Turkish crypto exchange that went missing in April 2021 with investors' funds worth over $2 billion. At the time, Faruk Fatih Özer, the founder and CEO of the now-defunct exchange, said that they had to cease trading due to cyberattacks and that investors' money was safe before disappearing.

In 2021, Turkey opened an investigation into Özer on suspicion of fraud and founding a criminal organization, arrested dozens of Thodex employees, and seized the firm's computers. Interpol also issued a red notice which means every police force in the world was asked to locate and arrest him.

In Sept. 2022, Özer was arrested in the Albanian city of Vlorë. According to blockchain analysis firm Chainanalysis, roughly 90% of the total value lost to rug pulls in 2021 was attributed to just this one fraudulent centralized exchange.

As per the local reports, the state prosecutors are seeking a prison sentence of 40,564 years for all the involved parties, including Özer, as over 2,000 people are included in the indictment as complainants.

3. AnubisDAO

This dog coin project raised $60 million in ETH (13,597 ETH) from investors in return for native ANKH tokens. Not even 24 hours into the project, funding and the funds in the investment pool were sent to a different address and were never recovered.

With no liquidity left for trading the coin, the rug pull crashed the price of the ANKH token to zero.

AnubisDAO touted itself as a fork of OlympusDAO, a decentralized reserve currency backed by bond sales and liquidity providers. At the time of its launch, the team started with a discord server and a now-inactive Twitter account, but no website or white paper, and its developers went by pseudonyms.

“AnubisDAO should serve as a cautionary tale to investors evaluating similar opportunities. The most important takeaway is to avoid new tokens that haven't undergone a code audit,” Chainalysis said in its 2021 crypto crime report.

4. Squid Game (SQUID) Token

One of the worst rug-pulls in crypto was the Squid Game (SQUID) Web3 project, which was launched by an influencer on Binance SmartChain in 2021 and hyped up via massive press coverage. According to Solidus Labs, 12% of all BNB Chain tokens are scams.

Capitalizing on the popularity of the eponymous Netflix series, the Squid Game token raised $3.3 million from investors. The developers then drained SQUID's liquidity pools and ran off with users' funds.

In its report, Solidus Labs noted that the Squid Game token was the most famous example of the honeypot exploit, which called an external contract in its deployment contract, making it look like a rapidly-growing meme coin to many users.

The project had a website but was filled with grammatical errors and an anti-dump mechanism. One Twitch streamer caught the rug-pull on a live stream in real-time that showed the coin's market cap dropped from $2.2 trillion to almost zero instantaneously. As of writing, SQUID is trading at $0.0096, down more than 96% from its all-time high.

5. Mutant Ape Planet (MAP) NFTs

The developer of the Mutant Ape Planet (MAP) NFT collection, which is a knockoff of the popular Mutant Ape Yacht Club (MAYC) NFT collection, made off $2.9 million in a rug pull. He was recently arrested and charged with fraud.

Aurelien Michel, a 24-year-old French citizen who lives in the UAE, was taken into custody after landing at John F. Kennedy airport in New York. According to the complaint, Michel and other unnamed defendants marketed their NFT project to prospective buyers by promising them their purchases would come with benefits like “rewards, raffles, exclusive access to other cryptocurrency assets, and the support of a community wallet with funds to be used for marketing the NFTs.” Developers also made vague promises about acquiring “metaverse land,” but none of these promises came to fruition.

When all the NFTs were sold, the defendants allegedly transferred the funds to other wallets in Michel's control, who admitted to the rug pull in the community's Discord channel under the “James” pseudonym.

On-chain data suggests that Michel made away with millions of dollars from multiple other similar frauds such as Fashion Ape NFT and Crazy Camels, alleged prominent blockchain analyst ZachXBT.

Final Word

As we saw, crypto rug-pulls are among the worst ways to lose money in crypto. In rug-pulls, developers market their projects as legitimate and raise funds, but instead of using them for the benefit of the project, they pocket the money and run off.

Unfortunately, there is almost no recourse for those investors who were taken in by the hype and have had their money stolen from them as a result of a rug pull.

As such, it is important to pay attention to any noise about a new crypto project and always do your due diligence on any project you're interested in. Make sure to read the project's white paper and research the team members to ensure they are reputable.

Also, look for projects backed by well-known organizations or individuals in the crypto space. These projects are less likely to be abandoned, as there is more to lose for the team or founders.