What MemeCoin Investors Need to Know: All Types of Rug Pull Scams and How to Protect Yourself

As platforms like Pumpfun experience rapid growth, rug pull scams continue to evolve. This article explains, from the scammers’ perspective, how they exploit the MemeCoin market to execute rug pull scams. Understanding these scams is essential knowledge for investors to survive in the market.

Why MemeCoins Are a Breeding Ground for Rug Pull Scams

Since its debut in early 2024, Pumpfun has achieved astonishing growth as a MemeCoin issuance platform on Solana. Currently, over 1.7 million MemeCoins are listed on the platform, and the ability to create and trade MemeCoins with just a few clicks and no coding knowledge has attracted many speculators.

Along with the rapid expansion of the market size, Pumpfun’s revenue has also surged significantly, reaching weekly earnings of over $6.3 million. This surpasses even established DeFi projects like Aave and MakerDAO. While more than 40,000 active users participate in trading daily, the reality is much harsher.

According to statistics, only about 1.4% of MemeCoins announced on Pumpfun reach a market cap of over $60,000 and get listed on Raydium. In reality, over 80% of MemeCoin participants suffer losses, and most projects face rug pull scams. The harshness of this market makes it an ideal environment for scammers to operate.

Scammer Tactic 1: Building a Complex Fake Transaction Network

The first step scammers take to execute a rug pull is to create a foundation to hide their transaction footprints. After creating new MemeCoins on platforms like Pumpfun, they prepare multiple wallet addresses and employ techniques to make tracking difficult.

Typically, they set up dozens to hundreds of wallets for fake transactions. To conceal the relationships between these wallets, scammers utilize privacy protocols like Elusiv. Elusiv is a privacy-focused cryptographic protocol that encrypts transactions on Solana, making it difficult to trace the real identities and transaction amounts of participants.

An even more sophisticated method involves funneling funds from newly created wallets through centralized exchanges (CEXs) or mixers. This process eliminates direct links indicating that multiple wallets are controlled by the same person.

Using on-chain analysis tools like Bubblemaps, it becomes nearly impossible to detect direct relationships between these wallets. On the surface, they appear as different buyers and sellers on Pumpfun, so amateur investors often fail to realize these are fake transactions orchestrated by the same entity. This technique allows scammers to maintain control over a limited token supply while creating the illusion of multiple independent participants in the market.

Scammer Tactic 2: Planned Price Pumping and Media Strategy

In the second phase, scammers use their multiple wallets to generate trading volume, causing the MemeCoin’s price to rise rapidly. Once the token’s market cap reaches a certain level (usually several million dollars), they move to the next stage.

A key role here is played by social media and influencers. Scammers pay rewards to promote the MemeCoin through popular Telegram communities and Twitter accounts. Many ordinary investors see this information and, driven by FOMO (Fear of Missing Out), flood the buy orders.

During this period, scammers continue to artificially manipulate trading volume, ensuring the MemeCoin appears prominently on platforms like DEX Screener’s trending section. This attracts even more new participants, increasing the project’s visibility and liquidity. This process prepares for the final stage—gathering “prey.”

Final Stage of Rug Pull: Liquidity Drain and Fund Disappearance

The last step is the so-called “rug pull.” When sufficient liquidity has accumulated and the funds invested in promotion and artificial trading far exceed the actual token supply, scammers launch their attack.

They sell large amounts of tokens from multiple wallets (sometimes hundreds) all at once, flooding the market and then disappearing with the proceeds. A rug pull destroys the market by literally “pulling the rug,” leaving remaining investors holding worthless tokens.

Throughout this entire process, only three groups truly profit: first, the scammers (who control multiple wallets), second, the influencers paid for promotion, and third, a handful of early participants who manage to cash out just before the rug pull occurs. Over 95% of other participants end up as victims of the scam.

Survival Strategies for Investors: The Importance of Knowledge and Risk Management

The MemeCoin market is a high-risk, high-reward speculative environment. While stories circulate of someone making enormous profits daily, many others lose everything just as often.

Conduct Your Own Research (DYOR)

The first step is thorough market research. Instead of blindly trusting others’ words, investors need to develop the ability to analyze projects independently. Statistically, many successful traders base their decisions on detailed research and analysis.

Rather than seeking quick 100x or 1000x gains, it’s fundamental to scrutinize project teams, tokenomics, liquidity structure, and other key factors to avoid rug pulls.

Build Practical Experience and Methodologies

Theoretical knowledge alone is insufficient. Investors should learn how to use on-chain analysis tools, track smart money, and perform chart analysis. Many experienced investors develop their own investment strategies by combining knowledge acquisition with real trading experience.

The key is not to try to change your life with a single trade. Continuous learning and small experiments help develop a personalized approach, which is crucial for success.

Strict Position and Risk Management

Most importantly, manage your funds carefully. It’s recommended to limit your MemeCoin investment to about 5-10% of your overall portfolio. In other words, if you’re not prepared to lose all your invested capital, you should not enter the MemeCoin market.

Two principles emphasized by many successful investors are: one, preserving your principal, and two, not investing in things you don’t understand. Especially with high-risk assets like MemeCoins, adhering to these principles is your last line of defense against rug pulls.

Recent Trends and Regulatory Environment in the MemeCoin Market

The MemeCoin market is evolving rapidly, with significant changes in overall market structure. Recent weeks have seen increased institutional investment, regulatory responses from major projects, and further sophistication of scam techniques.

Of particular concern are regulatory developments across the globe. Many countries are establishing frameworks for cryptocurrency regulation, which will impact the MemeCoin market. For example, China has intensified crackdowns on crypto multi-level marketing scams, while Russia is exploring the launch of new exchanges backed by central bank digital currencies.

In this changing environment, investors need not only to seek market opportunities but also to deepen their risk awareness. Knowledge to protect against rug pulls, risk management skills, and the ability to analyze market shifts calmly will be decisive factors in the success of MemeCoin investments moving forward.

Ultimately, to survive in the MemeCoin market, it is essential to understand how scams work, maintain awareness of your position sizes, and stay vigilant against rug pulls. Dreaming is not inherently bad, but it’s crucial to stay calm and rational throughout the process.