The figurative meaning of pulling the rug out from under someone is withdrawing support. When used in the cryptocurrency space, a rug pull refers to a scam in which unsuspecting investors are left with worthless digital coins when project developers or creators drain liquidity pools and leave abruptly.
Malicious developers can also orchestrate a rug pull by exploring vulnerabilities in smart contracts. For instance, they can mint unlimited tokens or allow token purchases but block people from selling. The practice of rug pulling often happens in decentralized finance (DeFi).
Due to a lack of proper regulatory oversight when introducing new tokens on decentralized exchanges (DEXs), actors with bad intentions can launch a token quickly, promote it intensively, and drain the liquidity pool without a warning when it grows. Once the developers withdraw the money, they abandon the project and close all communication channels, including their pages on social media platforms and online communities.
