Rugged

To be rugged is to lose money through a crypto scam where token issuers abandon the project and disappear with investors’ money, leaving victims holding worthless tokens.

What Does It Mean To Be Rugged?

The term “rugged” or “being rug pulled” stems from a type of crypto scam known as a rug pull. A rug pull is when developers promote a project or crypto token to inflate its value and then abscond with investor funds. It stems from the metaphor of getting a rug pulled out from underneath your feet. When an individual or group of people fall victim or prey to a rug pull scam, they are said to be rugged.

Therefore, rugged could mean two things:

• To lose funds through a rug pull scam, or
• The actual investment scam itself.

How Does It Occur?

A malicious developer or creator of a new project lists tokens on a decentralized exchange (DEX), which is not as strict on listing requirements and code audits as centralized exchanges (CEXs) are. The project may use crypto influencers and bots to promote and create hype around the token to drive FOMO (fear of missing out), especially through social networks. Such projects often make unrealistic promises of potentially high returns that attract investors seeking quick riches.

Once the project has raised significant funds on its DEX liquidity pool, the developers withdraw all the investors’ funds and disappear, dragging the project’s token value to zero. This often happens within a short period after the project’s launch. 

There are two ways investors get rug-pulled – hard rugged or soft rugged. 

• Hard rug-pulled – Getting hard rug-pulled is when the project creators completely disappear with investor funds, leaving the victims with no way to track the perpetrators down. This means that investors have no way of recovering their funds.
• Soft rug-pulled – Being soft rug-pulled is often gradual, where malicious developers make a subtle strategic exit. This involves the developers minimizing their involvement with the project, reducing updates and interactions with the community, slowly dumping their tokens, or gradually draining off liquidity pools rather than in one fell swoop. This makes it potentially more difficult to detect until investors have been rug-pulled.

Being rug-pulled is more common in projects that lack transparency, promise substantial returns with little substance, and most likely have suspicious developers.