Draft:Slow rug pull
| Submission declined on 2 July 2025 by Theroadislong (talk). Your draft shows signs of having been generated by a large language model, such as ChatGPT. Their outputs usually have multiple issues that prevent them from meeting our guidelines on writing articles. These include:
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| Submission declined on 1 July 2025 by Qcne (talk). Your draft shows signs of having been generated by a large language model, such as ChatGPT. Their outputs usually have multiple issues that prevent them from meeting our guidelines on writing articles. These include: Declined by Qcne 2 days ago.
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| Submission declined on 1 July 2025 by Theroadislong (talk). This draft's references do not show that the subject qualifies for a Wikipedia article. In summary, the draft needs multiple published sources that are:
Your draft shows signs of having been generated by a large language model, such as ChatGPT. Their outputs usually have multiple issues that prevent them from meeting our guidelines on writing articles. These include: Declined by Theroadislong 2 days ago.
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| Submission declined on 1 July 2025 by Cactusisme (talk). This draft's references do not show that the subject qualifies for a Wikipedia article. In summary, the draft needs multiple published sources that are:
The content of this submission includes material that does not meet Wikipedia's minimum standard for inline citations. Please cite your sources using footnotes. For instructions on how to do this, please see Referencing for beginners. Thank you. Declined by Cactusisme 2 days ago. | |
Comment: Please read WP:REFB for help with correctly formatting your sources. Theroadislong (talk) 10:14, 2 July 2025 (UTC)
- Comment: Note to reviewers: user insists they did not use LLM to write this, see their user talk page. qcne (talk) 10:09, 2 July 2025 (UTC)
- Comment: Largely unsourced original research? Theroadislong (talk) 07:58, 2 July 2025 (UTC)
- Comment: This has obviously been written with AI. You need to completely re-write it. Do not re-submit until you have done that. qcne (talk) 19:22, 1 July 2025 (UTC)
- Comment: zero improvement since previous decline makes it pointless to re-submit. Theroadislong (talk) 19:15, 1 July 2025 (UTC)
A slow rug pull—also known as a soft rug pull, slow exit scam or slow bleed rug—is a type of fraud in which the founders or insiders of a cryptocurrency or decentralized‑finance (DeFi) project siphon value from investors incrementally rather than removing liquidity in a single transaction.PlasBit Research, "Slow Rug Pull NFT Scam: An In‑Depth Analysis", 29 Feb 2024.(plasbit.com)AIBC Media, "Crypto Rug Pulls: How to Spot and Avoid These Scams", accessed 1 Jul 2025.(aibc.world) By maintaining the appearance of legitimate development while quietly liquidating tokens or diverting treasury funds, perpetrators can prolong investor confidence and obscure the fraud.
The technique contrasts with a hard rug pull (or fast rug pull), where liquidity is withdrawn suddenly and the project disappears. Slow rug pulls account for a significant share of losses attributed to exit scams in the cryptocurrency economy.(arxiv.org)
Definition and terminology
[edit]The expression rug pull derives from the idiom "to pull the rug out from under someone", meaning to remove support abruptly. Community posts on cryptocurrency forums such as Reddit used the terms slow rug pull and soft rug pull as early as March 2022 to describe gradual, repeated sell‑offs by project insiders.(reddit.com) Academic literature categorises slow rug pulls as exit scams in which value extraction occurs over weeks or months, often through ongoing token sales, stealth minting, or manipulated transaction taxes.(fc23.ifca.ai)
Mechanism
[edit]Slow rug pulls typically share several behavioural indicators:
Gradual insider selling: Founders or wallets linked to the development team continuously off‑load pre‑mined or team‑allocated tokens on public markets, depressing price while avoiding panic.
Low‑float, high‑FDV tokenomics: Projects debut with deliberately tiny circulating supplies relative to their total supply, inflating fully‑diluted valuations (FDVs) during the initial hype and luring investors at elevated prices; subsequent scheduled unlocks expand supply gradually, letting insiders sell without triggering an immediate collapse.World.org, "The Circulating Supply of Worldcoin (WLD): An Explainer", 1 May 2025.
Treasury drainage: Project-controlled wallets transfer small amounts of native tokens or stablecoins to private wallets under the guise of "operational expenses".
Inflationary back‑doors: Smart‑contract functions allow privileged accounts to mint new tokens, diluting holders over time.
High or hidden transaction fees: Contracts impose elevated buy/sell taxes that are routed to wallets controlled by insiders.
Delayed roadmap execution: Project announcements, milestones and airdrops are repeatedly postponed to sustain engagement and discourage withdrawals.
Narrative management and community gatekeeping: Official social‑media channels (Discord, Telegram, X/Twitter, etc.) continue posting minor "development" updates and partnership teasers while moderators remove or discourage price‑related discussion and silence critics. Recruitment materials for Worldcoin's community‑manager team state that staff must "foster positive sentiment, messaging, and appropriate brand image" across Discord, illustrating how narrative control can be institutionalised.Protocol AI Job Board, "Head of Community — Tools for Humanity (Worldcoin)", accessed 1 Jul 2025. Investor‑education guides likewise flag "social media where discussions have been censored" as a hallmark of rug‑pull scams.Flipster Blog, "Rug Pulls Explained: How to Spot a Crypto Scam Before It's Too Late", Apr 2025.
Speculative rumor cultivation: Project insiders and affiliate influencers amplify unsubstantiated claims of marquee partnerships or AI integrations—for instance, recurring 2024‑25 chatter that OpenAI would adopt or integrate Worldcoin—while publicly distancing themselves from the rumors. These narratives help sustain demand during unlock periods without the project ever "going mask‑off".BeInCrypto, "Coinbase to List Worldcoin (WLD) Amid OpenAI Social Platform Rumors", 30 Apr 2025.TronWeekly, "Worldcoin Jumps 5% as Google, OpenAI Sign Strategic Cloud Deal", 11 Jun 2025.
History and main examples
[edit]SharedStake (SGT) – In June 2021 one of the protocol's founders exploited vesting contracts to siphon ≈US$138,000, beginning with small stealth sales before emptying additional wallets.(medium.com)
SafeMoon – U.S. Securities and Exchange Commission filings allege that core team members removed tens of millions of dollars' worth of liquidity‑pool (LP) tokens between April 2021 and 2022 while publicly claiming LP tokens were locked, causing a ~50 % price crash once withdrawals were revealed.(sec.gov)
Worldcoin (WLD) – Launched on 24 July 2023 with only 143 million tokens (≈1.4 % of its 10 billion maximum supply) in circulation, pushing the token price to roughly US$7.50 on debut. The price fell more than 70 % within a week and continued to slide as a linear unlock schedule worth about US$6 million per day began on 24 July 2024. Throughout 2024–25 the project leveraged aggressive community moderation and the circulation of unverified rumors linking Worldcoin to forthcoming OpenAI‑powered products; speculative news coverage in April and June 2025 attributed short‑lived price rallies to these rumors.BeInCrypto, "Coinbase to List Worldcoin (WLD) Amid OpenAI Social Platform Rumors", 30 Apr 2025.TronWeekly, "Worldcoin Jumps 5% as Google, OpenAI Sign Strategic Cloud Deal", 11 Jun 2025. Commentators argue that the low‑float, high‑FDV structure, combined with hype‑based rumor cycles and strict Discord moderation, enabled insiders to extract value gradually, making Worldcoin an archetype of the slow‑rug‑pull pattern.Cointelegraph, "Worldcoin se atasca tras una caída del 70% desde su pico máximo", 29 Jul 2023.Blockworks, "Worldcoin soars despite accusations of fraud", 25 Jul 2023.World.org, "The Circulating Supply of Worldcoin (WLD): An Explainer", 1 May 2025.Bitget News, "Can Worldcoin (WLD) rise despite pressure by daily token unlocks?", 8 Jul 2024.
MMFinance (Cronos) – Community reports from March 2022 accuse developers of steadily selling treasury‑owned tokens while continuing to launch new features, behaviour labelled as a slow rug pull on user forums.(reddit.com) (Cronos) – Community reports from March 2022 accuse developers of steadily selling treasury‑owned tokens while continuing to launch new features, behaviour labelled as a slow rug pull on user forums.(reddit.com)
Gen Z Quant memecoin – A 2024 case in which a teenage developer minted 51 million tokens, sold them during an overnight price spike and continued similar releases, was widely described as a "soft rug pull".(wired.com)
Prevalence
[edit]Exit‑scam revenues represented 37 % of all crypto‑fraud earnings in 2021, with research noting that many incidents involved slow rather than instantaneous withdrawals.(fc23.ifca.ai) A 2024 systematisation of knowledge (SoK) paper catalogued 2,360 rug‑pull events across multiple chains and identified 34 distinct root causes, many compatible with slow‑extraction techniques.(arxiv.org)
Detection and prevention
[edit]Projects engaging in slow rug pulls may initially pass automated liquidity‑locking or ownership‑renunciation checks. Recommended defensive measures include:
On‑chain monitoring of treasury and developer wallets for recurring small transfers or disproportionate selling;
Independent smart‑contract audits focused on hidden mint, fee or whitelist functions;
Token‑distribution analysis to spot concentrated holdings and release schedules;
Community governance controls such as multi‑sig wallets and time‑locked transactions;
Use of emerging analytic tools and dashboards trained on rug‑pull datasets to flag anomalous behaviour.(arxiv.org)
Regulatory and legal responses
[edit]Financial regulators have increasingly treated deceptive token sales and undisclosed liquidity withdrawals as violations of securities and consumer‑protection laws. The November 2023 SEC civil complaint against SafeMoon executives was one of the first U.S. enforcement actions to characterise an extended liquidity‑drain scheme as securities fraud.(sec.gov) Within the European Union, the Markets in Crypto‑Assets Regulation (MiCA) introduces issuer‑liability provisions intended to deter gradual exit scams.(fc23.ifca.ai)
See also
[edit]References
[edit]- ^ Exit Scams in DeFi: Taxonomy, Detection, and Countermeasures (PDF). Financial Cryptography & Data Security 2023 (FC '23) Pre-Proceedings. 2023-02-18. Retrieved 2025-07-01.
- ^ "Worldcoin Eyes Partnership with OpenAI Despite Regulatory Setbacks". Bloomberg. 2024-04-25. Retrieved 2025-07-01. [dead link]
- ^ "Complaint: SEC v. SafeMoon LLC et al" (PDF). U.S. Securities and Exchange Commission. 2023-11-01. Retrieved 2025-07-01.
- ^ "The Memecoin Kid and the Overnight Backlash". Wired. 2024-05-12. Retrieved 2025-07-01.
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