What Is a Rug Pull? Warning Signs Before You Buy a New Token

The message lands in a WhatsApp group at 7am: "New token launching today. Liquidity locked. Team doxxed. Get in before the big exchange listing. Don't say I didn't tell you."

By lunchtime the chart is a green wall. By evening, it's a flat line near zero, the token's X account is gone, and nobody in the group can sell.

That's a rug pull: the rug pulled from under everyone who bought. They follow a handful of familiar patterns, and many leave clues you can check before you put a kobo in.

How new tokens trade

Most brand-new tokens aren't listed on big exchanges. They trade on decentralised exchanges (DEXs), in a liquidity pool that holds the new token alongside an established coin such as SOL, BNB, ETH or USDT. Buyers put the established coin into the pool and take the new token out, and the price is set by the ratio between the two. Our guide to liquidity pools explains the mechanics.

The person who creates the pool receives "LP tokens" that represent their share of it. Keep that in mind, because it's the key to the classic rug.

The main types of rug pull

The liquidity pull

The creator launches the token, adds a pool, and lets buyers pile in. Every buyer adds SOL, BNB or USDT to the pool. Then the creator uses those LP tokens to withdraw the liquidity, taking nearly all of the established coin with it. The token still exists in your wallet, but there's nothing left in the pool to sell it for.

The hidden mint

The token's contract includes a function that lets the owner create new tokens whenever they like. Once the price is up, they mint a huge amount and sell it into the pool, draining it and crashing the price.

The honeypot

The contract lets anyone buy but blocks selling, or charges a sell tax so high that selling returns almost nothing. Sometimes only a whitelist of insider wallets can sell. The chart looks wonderful, because every trade is a buy. When the insiders cash out, everyone else is stuck.

The slow rug

No dramatic moment. The team holds a big slice of the supply and quietly sells it over weeks while promoting the project, or simply stops building and walks away. The end result is the same.

The pattern, day by day

Rug pulls vary, but many follow a similar shape:

• Day 1: the contract goes live with a small pool. Insiders buy a large share cheaply, often spread across several wallets so it doesn't look concentrated.
• Days 2–4: the hype arrives. Paid posts, a Telegram group with chat switched off, bots replying "this is the one", screenshots of early gains.
• Day 5: new buyers push the price up many times over.
• Day 6: the pull. Liquidity removed, tokens minted and dumped, or the sell switch quietly turned off. Socials go silent.

Ten checks before you buy a new token

1. Who controls the contract? Find out whether there's an owner who can change taxes, pause trading, blacklist wallets or mint. The contract page on a block explorer and free token scanners can show this. "Ownership renounced" helps, but some contracts are built to be upgraded later, which can bring the same powers back.
2. Can new tokens be minted? A mint function the owner can call is a serious warning.
3. Is the liquidity locked or burned, how much, and until when? A lock covering a small share of the pool, or ending next week, protects very little.
4. How concentrated are the holdings? Open the token's holders list. If a handful of wallets (other than the pool itself) hold a large share, they can crash the price whenever they like. Many fresh wallets funded from the same source is a bad sign.
5. Are ordinary holders actually selling? Look at recent transactions. If you only see buys, be suspicious. A chart with no red candles is a warning, not a dream.
6. What's the sell tax, and can it change? A tax the owner can raise at any time can turn into a honeypot overnight.
7. Who's behind it? Anonymous teams aren't automatically scams, but nobody is accountable if things go wrong. Claims that a team is "doxxed" can be invented too.
8. Is the hype real? Locked group chats, copy-paste replies, paid promotions and countdown timers are signs of a campaign, not a community.
9. Is there anything behind the token? A copied website and a vague whitepaper are red flags. Our guide on how to read a crypto whitepaper shows what to look for, and our 15-minute research checklist covers the rest.
10. How would you ever get naira out? A token that trades in a single DEX pool has to be swapped into something like USDT, SOL or BNB before you can sell it for naira. Know that route before you buy, not after.

Token scanners are useful, but they miss things, and scammers design contracts to slip past them. Buying a tiny amount and test-selling it can expose a crude honeypot, but some contracts allow small sales and block larger ones. No single check is enough.

If you're going to play anyway

Our honest view: most people are better off leaving brand-new tokens alone. If you still want to take part, set your own rules first.

• Use only money you could lose completely. Not rent, not school fees, not anything borrowed.
• Use a separate wallet with nothing else in it.
• Don't approve unlimited spending for a DEX or a launch site, and revoke approvals afterwards, as in our guide to wallet drainers and token approvals.
• If it goes up, consider moving some of it into a coin with a real market.

Our guide to memecoins explains why these tokens attract so much attention, and why so many of them crash.

If you've been rugged

Accept that the money is very likely gone, and don't send more chasing it. Revoke any approvals you gave, report the token where it was promoted, and write down what drew you in, so it's harder to catch you next time. Then ignore every message promising to recover your funds. People who've just lost money are exactly who recovery scammers look for.

Keep your naira route simple

KWIQ supports 20+ established coins, including BTC, USDT, ETH, SOL, BNB and TRX, and selling them for naira costs nothing, with the rate and naira amount shown before you confirm. The app also lets you buy crypto, so check the current buy rate there. Download the KWIQ app or create a free account on the web and let the next 7am WhatsApp tip go unanswered.