A rug pull is a type of exit scam where project developers abandon a project and run away with investor funds. They are unfortunately common in the crypto space, particularly in DeFi and NFT markets.
Red flags include anonymous teams with no verifiable track record, unaudited smart contracts, minting functions that allow unlimited token creation, liquidity that is not locked, and aggressive marketing with unrealistic promises. On-chain analysis tools can reveal if team wallets hold a disproportionate supply of tokens.
Before investing, verify that liquidity is locked via a reputable service like Unicrypt or Team.Finance for a meaningful duration. Review the contract on Etherscan or BscScan for dangerous functions. Check if the project has been audited by a recognized firm and whether the team has doxxed their identities.