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Author: Admin | 2025-04-28
Whether or not crypto rug pulls are illegal depends on the specific circumstances.If you need a black-and-white answer, rug pulls are illegal.There are two types of rug pulls you need to know:Hard Rug Pulls: Where developers code malicious backdoors into their tokens, are typically illegal. The hard rug pull chart looks similar to pump and dump charts.Soft Rug Pulls: Where developers dump their crypto assets quickly, are more difficult to define as illegal but are still unethical and fraudulent. This is often difficult to trace but not impossible to trace, as more than 80% of soft rug pulls are traced to date.This is not to be confused with crypto hacks, whereby the developers' incompetence resulted in the loss of users' funds. We covered in-depth how you could learn how to protect yourself from crypto hacks.Crypto regulation is still in its early stages, and there needs to be a clear consensus on defining or prosecuting crypto rug pulls. However, some countries and jurisdictions are taking steps to address the issue.The US Securities and Exchange Commission (SEC) has filed lawsuits against several cryptocurrency companies allegedly engaged in fraudulent activities, including rug pulls.For example, let's take a look at Aurelien Michel, a French national residing in the United Arab Emirates (UAE) rug-pulled "Mutant Ape Planet" and is now immediately taken into custody right after landing at JFK airport in New York—he had zero clue that the police were waiting for him.Even if a crypto rug pull is not technically illegal, recovering stolen funds can still be difficult because cryptocurrency transactions are pseudonymous and often irreversible.Additionally, rug pull scammers often operate from jurisdictions with weak or nonexistent laws against cryptocurrency fraud.What is a Rug Pull?A rug pull is a type of cryptocurrency scam where developers create a new token and promote it to investors, only to suddenly abandon the project and take the investors' money with them.This is often done by creating a liquidity pool for the token, which allows investors to buy and sell it. Once the token has gained some value, the developers will withdraw the liquidity from the pool, leaving investors with worthless tokens.Rug pulls have become increasingly common in recent years as the cryptocurrency market has become more popular.They are particularly widespread in the decentralized finance (DeFi) space, with less regulation and oversight. Even with tons of regulation in CeFi, rug pull is nearly impossible, but it is still possible.
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