How to avoid rug pull scams

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How to avoid rug pull scams

The scammers have defrauded thousands of people of an estimated 200 crore in Himachal Pradesh by promising high returns in a short time through investment in crypto assets.

The gang, whose leader is yet to be arrested, used a Ponzi scheme method to lure people and also manipulate the prices of the cryptocurrencies they used to swindle money from investors.

The police say scamsters have launched new cryptocurrency assets and jacked up the prices of these digital currencies, which is called a rug pull in the crypto world.

What is this rug pulling?

A rug pull is a cryptocurrency scam where developers of a new cryptocurrency project leave the project and take investors' money with them. This can happen in several ways, such as disappearing with the project's liquidity, disabling the project's website and social media accounts, or making it impossible for investors to sell their tokens.

The price of tokens could plummet in the rug pull, as fraudsters dump their own tokens on the market.

Rug pull is basically derived from the English phrase to pull the rug out from under someone, means to remove support to somebody suddenly.

Rug pull is a major problem in the cryptocurrency industry, with billions of dollars lost annually to such scams. A recent report by Chainalysis found that rug pulls accounted for more than 36 percent of all cryptocurrency scams in 2021.

How can I avoid being victimized by rug pulls? The crypto investors must be aware of a few factors:

Be sure to research and understand what the project is trying to accomplish before investing in any cryptocurrency project. Look at the project team and see if they have a good track record.

Be wary of projects with high returns and low risk. If a business provides high returns with little to no risk, it's probably a scam. There is no such thing as a guarantee that a stable investment is not possible in the cryptocurrency industry, which is a volatile asset class.

Beware of projects that are heavily hyped on social media. Scammers frequently use social media and other platforms to promote their projects. Don't let anyone make a big money by promoting their projects without any substance behind it.

Lifelong risk tolerance: invest only what you can afford to lose. Cryptocurrency is a high-risk investment, so only invest what you can afford to lose.