Warning signs of a rug pull. Did you ever fall victim to any?

By now most of us should know what a rug pull is by now. Rug pulls have happened in both the crypto and NFT markets. In short a rug pull is when a development team or creator pumps their project then disappear with all its liquidity by selling or removing it. In 2021 alone it is estimated that $7.7 billion have been stolen from crypto investors via rug pulls.

There has been numerous rug pulls over the years and many from this sub have fallen victim. The warning signs are sometime very easy to spot however most times you need to look into the project a little more. Some have even remained delusional and still think that their coin is goin to pump not even knowing it was a rug pull.

One of the easiest warning signs of a rug pull is when the developers are unknown it make it so easy for people to disappear without a trace when they remain anonymous. Development teams or creators should be fully doxxed so people would know about their track record and even if they are unknow you must assess if they would be able to deliver their promises. Although the largest crypto currency was developed by Satoshi Nakamoto an unknown group or person it's no longer the same.

Another set of warning signs are the quality of its social media account, website and white paper. If its social media has little followers and the followers seems to be bots there is a high chance it is a rug pull. The same applies to the quality of text and information on its website and white paper. Projects white paper should outline its goals and objectives clearly and have proper gramma. Scammers usually don't really put time and effort into their websites and white paper.

No Liquidity lock is another major warning sign. Liquidity refers to the funds that crypto developers need to create to enable their investors to sell and buy immediately. With no liquidity lock developers cant easily disappear with all the liquidity. It is recommended that liquidity be locked by smart contracts for a minimum of three to five years because this gives enough time for your coin to grow to a scale where investors will put in liquidity thus providing assurance that there isn't goin to be a rug pull. The percentage of the liquidity that has been locked should be around 80-100%.

A limit on sell orders is another warning sign, if you are unable to sell a coin it is more than likely that it was coded to restrict the sell ability. An example is squid game coin, holders were unable to sell the coin even though it was clocking above 40,000% gains. A simple work around is to buy a small amount of the coin and try to sell it, if your are unable to sell then it is more than likely a rug pull.

Uneven distribution of coins is a common sign of a rug pull if more than 20% of a token supply is owned by 1 wallet or if 10 wallets owns more than 20% of a token supply then they can all sell at once causing the token to crash. The has happened countless times in the past.

In addition to the warning sign above Due Diligence tools like Token Sniffer and RugDoc can be used to assess the likelihood of a rug pull. The are other signs of a rug pull and I invite anyone to add to this in an effort to help people avoid these scams. Always DYOR before investing and never be gullible when investing into crypto projects.

Please Share your experience if you ever fell victim to a rug pull.