A rug pull is a cryptocurrency scam in which engineers abandon a project and steal investor money. These exits occur unexpectedly, leaving investors with worthless tokens and no way to retrieve their funds. The word is derived from the expression “pulling the rug out from under someone,” which accurately depicts how victims feel.
This guide identifies the ten most notorious rug pulls in cryptocurrency history. Each instance provides clear lessons about what went wrong and how investors overlooked important warning indicators. This article is for crypto investors, traders, and beginners looking to protect their portfolios. Whether you’re new to digital assets or have experience with DeFi, identifying these red flags is important. Smart investment decisions begin with learning from previous blunders that have cost others millions of dollars.
Also read: What Is a Rug Pull in Crypto?
Biggest Crypto Rug Pulls of All Time
Project Name | Year | Amount Lost | Key Red Flag |
OneCoin | 2014-2017 | $4 billion | No blockchain existed |
Africrypt | 2021 | $3.6 billion | Locked investors out |
PlusToken | 2018-2019 | $2.9 billion | Unrealistic returns |
BitConnect | 2016-2018 | $2.4 billion | Guaranteed returns |
Thodex | 2021 | $2 billion | CEO disappeared suddenly |
Mirror Trading International | 2019-2021 | $1.7 billion | Fake trading bot |
WoToken | 2018-2019 | $1.1 billion | Clone of PlusToken |
AnubisDAO | 2021 | $60 million | Anonymous team |
Uranium Finance | 2021 | $50 million | Unaudited contracts |
Squid Game Token | 2021 | $2.5 million | Could not sell tokens |
OneCoin
Between 2014 and 2017, OneCoin robbed investors of nearly $4 billion using a large Ponzi scheme. Founder Ruja Ignatova, sometimes known as the “Cryptoqueen,” promised investors profits through a new cryptocurrency and blockchain. The idea did not include any blockchain technology, merely a centralised database managed by the firm.
The scam worked because OneCoin used aggressive multi-level marketing strategies in numerous countries. Promoters received commissions for bringing in additional investors, resulting in a pyramid structure that benefited early participants. The corporation hosted expensive events and created instructional packages worth thousands of dollars each.
The essential takeaway from OneCoin is to ensure that a cryptocurrency has a legitimate, publicly auditable blockchain. Any project that does not provide visible onchain transactions or independent blockchain explorers should be shunned entirely. Ignatova disappeared in 2017 and is still on the FBI’s Ten Most Wanted list today.
Africrypt
South African cryptocurrency investment company Africrypt disappeared in June 2021, leaving an estimated $3.6 billion in Bitcoin. The platform’s founders, brothers Raees and Ameer Cajee, said hackers had entered their servers. They encouraged investors not to report the issue to police since it would impede recovery attempts.
The Cajee brothers disappeared soon after the purported hack, and investigators discovered no proof of a breach. Law firms representing victims attempted to freeze and reclaim assets across multiple legal jurisdictions. The case demonstrated how cross-border investing platforms might take advantage of regulatory gaps and enforcement issues.
This example reminds investors to be wary of platforms that offer guaranteed profits on cryptocurrency investments through proprietary trading. Legitimate investing firms report transparently, conduct frequent audits, and explain their plans clearly. Any request to avoid reporting suspicious activity should result in the instant removal of all monies.
PlusToken
PlusToken started in 2018 and went out of business in June 2019. It stole about $2.9 billion worth of Bitcoin, Ethereum, and other cryptocurrencies. The project advertised itself as a smart wallet that could earn up to 18% a month through exchange trading and mining. This complicated Ponzi scheme scammed more than three million people across China, Korea, and Southeast Asia.
Scammers used pushy social media marketing, real-life events, and public ads to make it look like they were real and build trust. Early investors got profits that were paid for by deposits from new investors. This made them want to get their friends and family to invest too. Between 2019 and 2020, Chinese authorities arrested more than 100 people who were involved in the scheme. Of these, 27 ringleaders are now facing jail sentences.
Blockchain experts tracked the stolen money as it moved through mixing services and over-the-counter dealers. This caused the price of Bitcoin to change a lot in 2019. People thought that the PlusToken liquidations, which happened that year, helped cause big drops in the market as crooks cashed out. The leaders of the gang were given jail terms in China that ranged from two to 11years in November 2020. About $4 billion worth of coin assets were taken away in the case. This is one of the biggest recoveries in the history of crypto fraud.
BitConnect
In 2016, BitConnect came out and said it would offer daily returns of up to 1% through a trade bot that never existed. The platform’s BCC token went through the roof and was worth more than $2.4 billion, making it one of the ten most valuable cryptocurrencies by market capitalisation. Founder Satish Kumbhani, an Indian man aged 35 years, planned this huge scam that scammed investors out of about $2.4 billion.
BitConnect put on expensive global conferences with outrageous marketing events that became famous in the crypto community. Influencers aggressively promoted the platform, making referral fees while persuading their followers to invest all of their life savings. The lending platform offered returns that would grow over time, which could not be possible if new investors didn’t keep putting money in.
Late in 2017, warnings from securities officials in a number of countries started to show up. In January 2018, BitConnect suddenly shut down its lending and exchange services. This caused the price of the BCC token to drop by over 90% in just one day. The huge crash led to the famous “BitConnect Guy” meme, which has become a viral sign of investment mania fuelled by hype. Kumbhani went missing in 2021 and is still on the run, but the SEC sued BitConnect promoters, setting a standard for prosecution.
Thodex
In April 2021, Turkish cryptocurrency exchange Thodex shut down after its founder, Faruk Fatih Özer, reportedly left the country. About 391,000 users were locked out of their accounts without any warning or reason from the exchange. Losses are thought to have hit $2 billion, but exact numbers are still being debated because of the lack of information.
Özer said the exchange needed time to deal with an unnamed relationship problem and promised to fix everything. Instead, he allegedly took investor money and left Turkey for Albania while users desperately tried to get into their accounts. An international arrest warrant was issued by Turkish authorities, and he was finally sent to Turkey to stand trial in 2023.
Users don’t have direct control over their private keys or funds on centralised markets, so there is counterparty risk. Study the people who started the exchange, make sure they have the right licenses, and never store a lot of money on any platform. Özer’s arrest shows that there are legal penalties, but it is still very hard to get back money that was stolen.
Mirror Trading International
Mirror Trading International was a South African Bitcoin investment business that promised 10% monthly profits through automated trading from 2019 to 2021. Johann Steynberg, the company’s founder, said that he used AI bots to make money for investors by trading FX. The scheme got about 100,000 participants from more than 140 countries and handled between 29,000 and 46,000 Bitcoins worth $1.7 billion.
The platform employed multi-level marketing to get people to join the investment pool by offering them bonuses for bringing in new members. During the COVID-19 lockdown in 2020, MTI’s membership grew quickly as people looked for ways to make money while stuck at home. Warnings came from the South African Financial Sector Conduct Authority and other international agencies, but the scheme kept on until Steynberg went missing.
In December 2020, Steynberg ran away to Brazil. He was captured there in late 2021 on an Interpol warrant for using fake ID cards. In April 2023, the Western Cape High Court said that MTI constituted both a pyramid and a Ponzi scam. The US Commodity Futures Trading Commission told MTI to pay plaintiffs more than $1.7 billion in damages. Blockchain research demonstrated that there wasn’t any trading going on and that the platform was just using new investors’ money to pay off old investors.
WoToken
WoToken stole almost $1.1 billion worth of bitcoin from more than 715,000 people between July 2018 and October 2019. The Chinese Ponzi fraud claimed to be a smart crypto wallet that made money automatically through algorithmic trading bots. It claimed monthly returns ranging from 6% to 20%, depending on the level of investment, and it mostly attracted investors from China and Korea.
The platform charged members money and used a 501-level multi-level marketing system to get others to sign up. According to court testimony, at least one defendant was involved in both the PlusToken scam and the WoToken scam. The scam got 46,000 Bitcoin, 2 million Ethereum, 292,000 Litecoin, and hundreds of thousands of other cryptocurrencies by making fraudulent promises.
In 2020, Chinese authorities detained six main operators and gave them prison sentences ranging from six months to 11 years. The court found them guilty of running a multi-level marketing scheme, lying in ads, and hiding money they made from illegal acts. About $63 million of the stolen money was found, but most of it is still missing. WoToken shows how thieves typically copy successful fraud concepts after looking at other scams like PlusToken.
AnubisDAO
AnubisDAO only lasted less than 24 hours when developers stole $60 million from their liquidity pool in October 2021. The initiative pitched itself as a decentralised reserve currency, similar to OlympusDAO, and garnered a lot of interest. Investors invested in the protocol, looking for big yields via the rebase mechanism.
The mysterious developer team erased all liquidity shortly after its introduction, with no communication or notice. Blockchain analysis later revealed that the stolen funds were moving through a variety of mixing services and exchanges. Following public pressure and the identification of suspects by blockchain detectives, some of the funds were eventually restored.
Never invest in forks or clones of successful products without first investigating the people behind them. Anonymous teams launching high-value initiatives should be viewed with severe scepticism, regardless of marketing quality. Always begin with small test amounts before committing large funds to a new protocol.
Uranium Finance
Uranium Finance lost around $50 million in April 2021 due to an exploit in its unaudited smart contracts. The protocol sought to function as an automated market maker on the Binance Smart Chain, with additional functionalities. A significant issue in the balance computation mechanism allowed attackers to deplete liquidity pools in a systematic manner.
The development team said that the occurrence was the result of an unintentional code fault rather than planned theft. However, releasing financial protocols without competent security checks is, at the very least, grossly negligent. The project attempted to continue operations later, but it never regained user trust or significant liquidity.
This event demonstrates why security audits are required for any protocol that handles real user payments. Even experienced developers make costly blunders when dealing with sophisticated smart contracts. Investors should only adopt methods that have undergone several independent audits by recognised security firms.
Squid Game Token
In November 2021, Squid Game Token peaked at $2,861, capitalising on the success of the Netflix series. The token’s smart contract had code that prevented investors from selling, resulting in a classic honeypot scenario. Developers inflated the price through marketing, while retail investors poured money in without reviewing the contract.
When developers sold their interests and abandoned the project, the price fell to near-zero in minutes. Approximately $2.5 million fled when investors found they couldn’t trade their tokens on any exchange. The project’s website, social media accounts, and Telegram channels all disappeared after the dump.
This story demonstrates why hype-driven investments based on popular culture trends are extremely risky without fundamentals. Before purchasing any amount, always make sure that the smart contract for a token permits for selling. Buy and sell tiny amounts first, and check community forums for stories of selling problems.
How to Spot a Rug Pull Before It Happens
Recognising warning flags before investing will help you avoid losing money in cryptocurrency scams. Here are the most significant signs that every investor should pay close attention to:
Anonymous development teams are one of the most obvious red flags in any cryptocurrency project. Legitimate projects typically feature public teams with recognised professional backgrounds and a social media presence. Developers who mask their identity face no personal consequences for stealing investor funds.
Key red flags to watch for:
- Anonymous or fake team members with no verifiable professional history
- Unaudited smart contracts without security reviews from reputable firms like CertiK or Hacken
- Unrealistic promises such as guaranteed returns or “100x potential in days”
- No liquidity locks or locks shorter than three to six months
- Excessive token allocation to the team (more than 20% of total supply)
- Smart contract functions allowing unlimited token minting or address blacklisting
- Websites with poor design, grammatical errors, or copied content from other projects
- No clear roadmap or vague descriptions of the project’s actual purpose
- Pressure tactics urging immediate investment before “missing out” on opportunities
- Social media accounts created recently with purchased followers or engagement
Before investing any money, undertake due diligence. Verify team identities using LinkedIn, GitHub, or past successful projects they have started. Check to see if the smart contract has been audited, and if so, check the audit report for any critical findings. Confirm that liquidity tokens are securely secured with services such as Unicrypt or Team Finance for an acceptable period of time. Examine the token contract on blockchain explorers for any unusual functions or centralised control mechanisms.
How to Protect Your Crypto Portfolio from Scams
Protecting your investment necessitates many levels of security and thorough project evaluation before committing funds. Here’s a comprehensive way to reduce your chance of falling victim to cryptocurrency scammers.
Smart contract audits are your primary line of defence. Invest only in projects that have received professional smart contract audits from credible companies such as CertiK, Hacken, or Trail of Bits. These audits do not ensure safety, but they do identify obvious flaws and dangerous coding patterns. Check that the audit is current, includes the deployed contract version, and fixes any important findings.
Essential security practices every investor should follow:
- Diversify your crypto investments across multiple projects, sectors, and risk levels to limit exposure
- Never allocate more than 5-10% of your portfolio to speculative or newly launched projects
- Keep the majority of your holdings in established cryptocurrencies with years of operational history
- Use hardware wallets like Ledger or Trezor for significant holdings worth protecting
- Enable two-factor authentication on all exchange accounts and crypto-related services
- Never share your private keys, seed phrases, or wallet access with anyone
- Verify smart contract addresses before interacting with any DeFi protocol
- Start with small test transactions before committing larger amounts to new platforms
- Join community forums to learn about reported issues or suspicious activity
- Set price alerts and monitor your investments regularly for unusual activity
In any case, legitimate projects and platforms will never ask for your secret keys or seed phrases. If someone who says they can help you with technology issues asks for this information, they are probably trying to scam you. Instead of clicking on links from emails or social media, use the official website URLs that you have saved in your bookmarks.
What Happens After a Rug Pull?
Recovering funds after rug pulls proves extremely difficult due to cryptocurrency’s pseudonymous nature and cross-border complications. However, most rug pull cases end with complete loss and no meaningful recovery for victims.
What typically happens after a major rug pull:
- Victims file reports with local law enforcement who often lack crypto expertise
- Blockchain analysis firms track stolen funds through mixing services and exchanges
- Class action lawsuits form, but face jurisdictional challenges in crypto cases
- Regulators like the SEC or the FBI may investigate if losses exceed certain thresholds
- Social media campaigns pressure developers to return funds with limited success
- Some perpetrators face criminal charges if their identities become known
- Most victims never recover their full investment despite legal efforts
Reporting scams to the police is important, even if it doesn’t look like the money will be recovered, because it helps build court cases. Keep records of all transactions, contacts, and evidence right away so that information can be found and tracked. It’s possible to claim these losses as capital losses on your tax returns, which would lower the amount of money you have to pay taxes on. Use KoinX to keep accurate records of your crypto losses so that you can report them correctly for tax reasons.
Conclusion
History’s most significant crypto rug pulls reveal distinct patterns that savvy investors can easily identify. Recurring themes of anonymous teams, unaudited contracts, unrealistic promises, and unlocked liquidity are prevalent in these scams. Recognising these warning signs greatly minimises your risk. Ensure you confirm team identities, conduct thorough security audits, and start by testing contracts with minimal amounts.
Effective portfolio tracking and accurate tax reporting are crucial, whether you’re actively trading or holding investments for the long haul. KoinX empowers you to keep precise transaction records, accurately assess gains and losses, and produce tax reports that meet IRS standards. If you’ve experienced losses from a rug pull, KoinX is here to assist you in documenting those losses for potential tax deductions. Discover KoinX today and empower yourself to manage your crypto taxes while safeguarding your investments.
Frequently Asked Questions
Can You Recover Funds After a Rug Pull?
It’s quite rare for recovery to happen, but it can happen in some cases if you act quickly and put legal pressure on the person. You should call the FBI, SEC, or your local cybercrime section right away and provide them with all the proof.
For possible legal action, keep records of everything, including transaction hashes, wallet addresses, correspondence, and screenshots. Some victims have gotten some of their money back after the criminals were found and pressured, but getting all of it back is still improbable.
You can list your losses as capital losses on your tax return, which lowers the amount of money you have to pay taxes on for the year. With KoinX Tax Reports, you can keep accurate records and submit your crypto losses to the IRS.
Are Rug Pulls Illegal?
Yes, rug pulls are illegal and against the law in many nations throughout the world. However, it is still hard to enforce because cryptocurrencies can be used anywhere, and blockchain technology can make transactions anonymous. In the US, the SEC and DOJ, and elsewhere, other international authorities are increasingly prosecuting people who commit rug pulls.
It is more possible that developers will be prosecuted if their names are known and they work in nations with strong legal systems. Recent examples indicate that police can successfully extradite criminals across borders and get them convicted with long jail sentences.
Do Rug Pulls Affect My Crypto Taxes?
In most places, you can claim money lost in rug pulls as capital losses on your tax return. The IRS counts losses from bitcoin scams the same way it treats other investment losses that lower your taxable income. You need to keep good records of the loss, including transaction data, dates, amounts, and proof of the fraud.
What’s The Difference Between a Rug Pull and a Failed Project?
A rug pull is a type of planned scam in which developers trick investors and steal their money with the purpose of doing harm. Projects that fail may have trouble getting people to use them, run out of money, or have technical problems, but this doesn’t mean that the developers are trying to hurt them. To tell the difference between an unexpected failure and a planned scam, look into the team’s history, openness, and how they communicate.
When a project fails, real teams usually keep talking to their community, try to find answers, and use the leftover cash wisely. Rug pulls happen when money suddenly disappears, liquidity withdrawals are locked, and investors are left with little notice or explanation.
How Can I Tell If a New Crypto Project is Legitimate?
Legitimate projects have a number of traits that fraudsters can’t readily or consistently copy. Make sure that the people on the team have authentic, verified identities and professional backgrounds on LinkedIn and GitHub. Check the smart contract audit from well-known companies and make sure that it covers the contract that was actually deployed. Check that the liquidity is locked for at least six months and that blockchain explorers can see proof of this.
Check to see if the project has a clear, realistic plan for the future that doesn’t make promises of assured returns or benefits that are too good to be true. Look for developers who are open and honest in their communication and who answer technical queries honestly and admit when they can’t do something.
Why Do Most Rug Pulls Happen on New Blockchain Networks?
Rug pulls are more likely to happen on new blockchain networks since they don’t have established security standards, experienced developer communities, or regulatory oversight. Projects hurry to launch on new chains to be “first movers,” but often don’t do enough testing or auditing. Scammers can set up fake contracts and liquidity pools more easily on new networks because petrol prices are lower. A lot of people who invest in new chains are new to the game and don’t know how to check contract security correctly.
Fraud is most likely to happen where there are no established audit firms, security tools, or community watchdogs. Be extremely careful when putting money into blockchain projects that started up in the last year.