NFT and Crypto Scams: What is a Carpet Pull?
At best, most Americans are skeptical of cryptocurrency (Pew recently reported that 63% of Americans have little confidence in the reliability and safety of cryptocurrencies). But that hasn’t stopped crypto from becoming a staple in the investment world, with the global cryptocurrency market cap growing by 36% in 2024. So if you’re hoping to join the ranks of the 562 million people who own cryptocurrencies worldwide, it helps to go into your investment with your eyes wide open to scams and risks. And one of the biggest of all? Pull the carpet.
Here, Spokeo breaks down what carpets are, how they affect the sector as a whole and what you can do to avoid falling victim to one.
What is a Crypto Rug Pull?
Since first breaking into the mainstream in 2018 (it’s been available since around 2009), crypto has become central to the online scammer’s repertoire, particularly in popular scams like online and phone phishing, catphishing, and identity theft. Scammers like to target crypto because it is difficult to trace; there is no centralized banking authority to flag suspicious transactions, and unlike most bank transfers, crypto transfers cannot be reversed. And the problem is so widespread that consumers worldwide lost $2.2 billion to crypto scams in 2024, 21% more than they did in 2021.
Despite their popularity, those everyday scams aren’t crypto pulls, but the pulls rely on many of the same elements — namely, crypto’s lack of traceability and centralized accountability.
In a crypto carpet, a person or group collects assets from the public by selling a token (this is the digital representation of crypto assets – the “currency” in cryptocurrency), usually promising a high return on investment or even exclusive rewards and other investment incentives. Once they’ve raised tons of assets from those token investments, they suddenly shut down the project entirely and often “accidentally” disappear from public view at the same time. This, of course, leaves them with a big bag of cash, while their victims have nothing to show for it but piles of worthless chips. The rug was pulled out from under them in one swift motion.
Types of Crypto Rug Pulls
Crypto carpet pulls generally follow the same “unceremoniously gather assets and bail” cadence, but vary in execution. Crypto rugs usually fall into one of these categories:
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The team exit is probably the most well-known type of cryptographic rug-pulling. Here, the team behind the coin raises support and investment, then falls off the map, leaving investors with a worthless token.
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Similarly, some crypto rug pulls go full circle fake projects which doesn’t even materialize before the creators run off with the bag.
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The pump and discharge the strategy occurs when scammers artificially inflate the price of the token through coordinated buying, then coordinate a mass sale at the peak value, in turn squeezing the value of the token. This is also known as symbol dumping.
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Liquidity drags they are a little more nuanced. Here, fraudsters deplete the liquidity of a pool of tokens, intentionally causing a token’s value to drop due to lack of interest.
In the NFT space
For those unfamiliar, NFT stands for non-fungible token, which are digital assets like visual art, videos, and other content that have been tokenized through a blockchain. Simply put, they are digital assets with unique identification codes. In 2025, however, you don’t need to worry too much about NFT rug-pulling, unless you’re floating in some pretty niche spaces, with market penetration estimated at a whopping – and stable – 0.15%.
That said, an NFT rug pull works a bit differently than a crypto rug pull: NFT developers promote a project – often under false pretenses – until they attract a lot of assets from investors who sell it. Whether it is a newly developed NFT or an existing one, developers will make misleading claims about its value or potential in order to knowingly sell low-value or worthless tokens at an inflated price.
Another, less common, NFT rug-pulling occurs when bad actors knowingly sell a token that has already been minted – meaning its ownership has already been established – to unsuspecting buyers.
(In)Famous Rug Pulls
Because the crypto carpet relies on investors to raise assets — and because they are most effective when they gain the unborn trust of investors — it is common for these scams to involve a public figure. That’s why so much carpet pulling has escaped the crypto community and made mainstream headlines. Well, that and the monumental losses some inflicted on their victims.
Hawk coin
Okay, let’s get this one out of the way. We know no one wants to hear the words “Hawk” or “Tuah” ever again, but what is perhaps the most well-known example of cryptographic rug-pulling also happens to be one of the most perfectly succinct, textbook examples of grift.
In 2024, memester “Hawk Tuah” Haliey Welch capitalized on her sudden viral popularity to launch a meme currency called “Hawk”. It promoted up to a market cap of $490 million before the token lost 95% of its value within hours. Then Welch, of course, went totally incognito.
Squid Token
Similarly, in 2021, unknown South Korean developers released a Squid token, unofficially themed around the Netflix hit, “The Squid Game.” When the price per token reached $2,861, the team website magically disappeared and the team could not be reached.
Thodex
Also in 2021, Thodex founder Faruk Özer took investment funds totaling $2.6 billion from 400,000 users before fleeing to Albania, claiming the money was lost in a cyber attack.
EthereumMax
Based on several celebrity-led carpet pulls, Kim Kardashian promoted EthereumMax to her 220 million+ Instagram followers alongside other celebrities such as Floyd Mayweather. She directly posted that EthereumMax’s team burned 40 trillion tokens to inflate its value as a way to “give back to the community.”
The token’s value dropped 97% over six months, and Kim only suffered a measly $1.26 million SEC fine for failing to label his post as an ad.
How to be safe from scams
{Note: This article is not intended as investment advice, but rather to help you identify potential scams.}
Entering a (relatively) young investment space that is known for its lack of regulation and governing bodies – while a key part of crypto’s decentralized appeal – inherently comes with a dash of risk. But, as is practically always the case, the risk can be minimized with a healthy dose of know-how. Whether you’re considering investing for the first time or have already been around the block (chain) a few times, keep these tips in mind:
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Always, always, always do your research before investing in any symbol. Search for transparency and a solid track record from the team behind it. Avoid anonymous developersand if you’re planning to add cryptocurrencies to your portfolio, stay informed and engaged with events in the crypto community.
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On a similar note, try to get a audit report from a third party before throwing money down, especially if the token is from newer or lesser-known developers.
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Check the token liquidity through white papers or smart contracts. Confirmation that funds are locked up for a reasonable window is a green flag; GAPS that allow developers to withdraw funds without any warning are a big red flag.
If you’re unsure about a token in any way, shape or form, avoid investing at all – or at the very least, start with a small amount of cryptocurrency before diving in head-first to minimize potential losses. And we probably don’t need to tell you this, but if you take one thing away from past crises, let it be this: Don’t be drawn in by the paid promises of influencers or celebrities promoting a token. Someone best known for making crude jokes on the internet probably isn’t your best financial advisor.
You can also use people search tools to find publicly available information about crypto developers, promoters or influencers. It’s a way to add an extra layer of due diligence.
This story was produced by Spokeo and reviewed and distributed by Forklift.