Crypto · Beginner · 4 min

Rug pulls, pump and dumps, fake projects

You can recognize the three most common crypto scams and the warning signs regulators point to.

Up 500%, then gone

A new token rises 500% in a week. A chat group celebrates every new high, and newcomers pour in. A few hours later, the price collapses to almost nothing, and the founders' social media accounts go quiet.

Scenes like this repeat constantly in crypto. Creating a token is cheap, rules are often weak, and hype spreads fast. This lesson explains the three most common schemes and the warning signs that regulators describe.

Three common scams

Rug pull. In a rug pull, the people behind a project collect money from buyers and then disappear with it. A common method: they create a token, pair it with real money in a trading pool on a decentralized exchange, attract buyers, and then withdraw the pool's money, leaving the token worthless. In a 2025 case, the SEC alleged that a developer kept such a pool unlocked despite public claims that it was locked, and took about 553,000 dollars in crypto assets.

Pump and dump. In a pump and dump, organizers buy a small coin cheaply, then hype it to push the price up, and sell into the rush. The CFTC warns that these schemes are mostly anonymous and organized in public chat rooms or messaging apps, sometimes with thousands of members, many of them fake or controlled by the organizers. They often spread false news, for example about a famous investor or company supporting the coin.

Fake platforms and projects. Some websites or apps look like real exchanges or investment programs. They show rising balances, but withdrawals never work, as described in the rubric on accounts.

Warning signs that regulators point to:

tips on social media or in chat groups, with pressure to buy now,
anonymous teams and unverifiable claims, such as locked liquidity or audits,
sudden price spikes in small coins without real news,
famous names used without confirmation from the person or company itself.

The CFTC's advice is direct: do not buy crypto based on tips shared on social media or on sudden price spikes.

Late buyers pay

A fictional chat group announces the next big coin. Its admins claim a well-known tech founder will announce support at 8 p.m.

The organizers already bought the coin at 0.01.
Members rush in. The price rises to 0.08 within an hour.
At 7:55 p.m., the organizers sell everything. The price falls back below 0.01.

No announcement comes. The organizers made eight times their money, paid for by the members who bought last.

Common mistakes

Buying because a group is large. Many members can be bots or organizers.
Trusting claims of locked liquidity or audits. Check them independently, if at all possible.
Believing celebrity rumors. Real support is announced through official channels.
Thinking you can sell before the dump. The organizers sell first.

The takeaway

Rug pulls, pump and dumps and fake platforms take money from late buyers. Hype, anonymous teams and tips on social media are the warning signs.

Check yourself

Quick quiz

4 questions. Instant feedback, nothing is saved.

1Tap the scheme in which organizers buy cheap, hype the coin and sell into the rise.

Tap the chart.

The CFTC warns that pump-and-dump schemes are often organized in chat groups and spread through social media.
2What did the SEC allege in its 2025 rug pull case about a token called GME?

The SEC alleged he withdrew liquidity worth about 553,000 dollars in crypto assets.
3What does the CFTC advise about tips in chat groups and on social media?

Groups can have thousands of members, many of them fake or run by the organizers.
4A new token's website shows a famous investor supporting it. What is the safest assumption?

The CFTC notes that pump and dumps often use false news about well-known business leaders.

of 4 correct.