What is Rug Pull?

A rug pull is a type of scam whereby a dubious blockchain project is "launched," only for the founding team to run away with investors' funds. Rug pulls typically occur in the decentralized finance (DeFi) ecosystem via a decentralized exchange (DEX) which enables malicious actors to create a cryptocurrency, list it on a DEX, and pair it with an asset like ether (ETH). Then, after a substantial number of unsuspecting investors exchange their ETH for the listed token, the founders withdraw funds from the liquidity pool, leaving investors holding essentially worthless assets.