You can catch most rug pulls in about ten minutes, before you spend a dollar. No coding. A block explorer, a free scanner, and the patience to look before the chart gets you excited.
I bought my first Bitcoin in 2011. The tools have changed a great deal since then. People still lose money the same way. They buy first and look second.
A rug pull is when the people behind a token take the buyers’ money and leave. Chainalysis counted $2.8 billion taken that way in 2021, which was 37% of all crypto scam revenue that year. The classic version is the liquidity pull. In October 2021 AnubisDAO raised about $58 million in a day from buyers who had a Discord channel and a dog logo to go on. There was no website. Around twenty hours in, the money left the pool.
Five checks catch most of them. Run them in this order, because the first one takes thirty seconds and rules out the worst cases. Before any of it, get the right address. Copy the contract address from the project’s own website or its CoinGecko page, never from a Telegram message. Scammers launch copies with the same name and ticker.
1. Can you sell it?
Paste the address into Honeypot.is. It simulates a buy and a sell and reports the tax on each. If the sell fails, stop there. If it passes, still make your first buy small and sell part of it straight away. A sell tax of 10% or more is a warning, because some contracts let the owner raise it later, all the way to 100%. That turns an ordinary token into a honeypot after you’re in.
2. Is the liquidity locked?
When a token launches on a decentralized exchange, whoever adds the trading pool gets LP tokens. They’re a receipt that lets the holder take the money back out. If those sit in the team’s own wallet, the team can empty the pool whenever it likes. On DEX Screener, look for LP tokens that have been burned, or locked with a service such as UNCX or Team Finance, and read the unlock date. A lock that ends in two weeks protects you for two weeks. That’s all it does.
3. What can the owner still do?
Open the contract on the block explorer: Etherscan for Ethereum, BscScan for BNB Chain, Solscan for Solana. Is the code verified, meaning published and readable? Unverified code on a token holding real money is a no from me. Then look at the owner’s powers. Can they mint new tokens, blacklist wallets, pause trading or change the tax? On Solana the same powers sit in the mint authority and the freeze authority, and both should be revoked.
Watch one trap here. “Ownership renounced” removes most of those powers on a simple contract. On a proxy contract it removes nothing, because a proxy can be pointed at new code whenever the team wants.
4. Who holds the supply?
The explorer’s Holders tab lists the biggest wallets. Set aside the burn address, the exchange pool and any locker. If the ten largest real wallets hold more than about a fifth of the supply between them, a handful of people can sink the price by selling. Watch for clusters too. Twenty wallets funded from the same source in the same hour are one holder.
5. Who launched it?
Every token has a deployer, the wallet that created the contract. Click through to it and see what else it has made, and what became of those tokens. A wallet with four dead tokens behind it is about to make a fifth. A fresh wallet funded through a mixer an hour before launch tells you the team planned to be hard to find.
One failed check is enough to walk away. There will be another token tomorrow.
What the free scanners miss
Free scanners run most of these checks in seconds. Token Sniffer and GoPlus cover Ethereum-style chains. RugCheck covers Solana. DEX Screener shows the pool, its age and how much money is in it. Use two of them, because they disagree more often than you’d expect.
They read code and wallets. They can’t read intent. A team that holds its tokens in the open, passes every scan, sells slowly over three months and then stops posting has taken your money just the same. No scanner flags that. The slower checks do: who the team is, what’s in the treasury, and whether anybody actually uses the thing.
Meme coins are the hardest case
On launchpads where anyone can create a token in a minute for a few dollars, the great majority go nowhere. The five checks still apply, but speed works against you. If you don’t have time to run them, you don’t have time to buy. Count anything you put in as already spent.
The full guide, with a table of where to look and what each red flag looks like, is at https://defimarketjournal.com/markets/how-to-spot-a-rug-pull.html on DeFi Market Journal.
I put all five checks on one printable page, Check a Token in 10 Minutes. It comes free with the Sunday Briefing, our plain-English email that lands every Sunday at 8 a.m. Eastern with the week’s new guides and what happened in the markets. One email a week, no price calls, and you can unsubscribe any time. Sign up at https://defimarketjournal.com/newsletter/ to get it.
This is information, not financial advice. No check or scanner can rule out a loss. Lost money in the US? Report it at ic3.gov, and ignore anyone offering to recover it for a fee.
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