Exit Scam
(Redirected from Rug pull)
Basics
- Aka Rug Pull. A scam in which developers raise a lot of money for a crypto project, then disappear with all of it. One of the most notorious rug pulls took place in 2018, when a start-up called Prodeum, after receiving a modest amount of funding, disappeared with all of the users’ money and left only the word penis on its home page.
- The act of a platform, founder or team to cash out / steal the projects funds/tokens and afterwards quit the projects further development or services.
- Has happened a lot with shady ICO's and Darknet Markets.
- A term, often used side by side with Rug Pull, in the DeFi sector, meaning developers stealing users money out of their protocol by using their admin keys. Quite often the developers of new DeFi projects built around liquidity mining are anonymous and therefore can easily disappear with money.
- From Decrypt (28-1-2021):
"DeFi “rug pulls” and exit scams made up 99% of all crypto fraud schemes in the second half of 2020, according to new data from blockchain analytics company CipherTrace. According to CipherTrace’s data, criminals “netted” $1.9 billion in 2020. That’s down from $4.5 billion in 2019, and up from $1.7 billion in 2018. A massive fraud scheme surrounding a coin called WoToken was responsible for $1.1 billion of last year’s figure. It was the single most expensive crypto crime of 2020, according to the report. Criminal activity surrounding the KuCoin hack and Fcoin came in second and third place.
“Half of all 2020 crypto hacks were of DeFi protocols—a pattern that was virtually negligible in all prior years—and nearly 99% of major fraud volume in the second half of 2020 stemmed from DeFi protocols performing ‘rug pulls’ and other exit scams in a pattern eerily reminiscent of the 2017 ICO craze,” says CipherTrace."
