Is Crypto Rug Pull Illegal?
This article simplifies the crypto rug pull process for beginners, briefly explaining how it occurs and later proceeds to suggest some plausible questions a crypto trader or crypto miner can ask the ICO in order to avoid any fraudulent transactions.
Before you get into the debate whether Crypto rug pulls are illegal or not, you must understand what the term means, because not every crypto trader is yet accomplished to understand the crypto-verse top to bottom. So, crypto rug pulls are a phenomenon where the creators of a project vanish with all the assets investors have put into their project. A financial expert from well known Crypto.com informs that Crypto rug pulls account for about 99 per cent of the total scams that potentially occur in the crypto-verse.
How does a crypto rug pull occur?
It doesn’t take a business analyst or a chartered accountant to understand that fraudulently acquiring someone else’s money – whether in the physical world or the digital sphere or by any other means – is legally, morally, and ethically wrong in every part of the world. All democracies have legal implications for money laundering, theft and heists. While cryptocurrency is essentially a decentralized currency, it does not escape the moral obligation of being a fair or unfair business exchange.
What exactly happens in a crypto rug pull is that fraudsters or scammers usually launch an Initial Coin Offering (ICO) as bait for victims. The reality of such ICOs is that scamsters release ICOs with the intent of pulling out their own money from a liquidity pool, and this they plan to do by deceiving potential investors. As cryptocurrencies start becoming an accepted mode of daily business transactions in Singapore, Canada, the UK, Malta, and several other countries, attempts are being made to bigger crypto rugs by hackers throughout. The bright side is, with cryptocurrency entering into the mainstream currency market, legal rulings regarding the same aren’t far away. Experts in law all over the world are demanding scrutinizing of transactions, and the creation of stringent prosecutions by law enforcement for crypto rugs pull incidents.
A technologist will debate that blockchain networks are built with great transparency when keeping a ledger of all transactions is concerned, but blockchains are ultimately decentralized systems, i.e., the exchanges taking place are not governed by any central authority and money transferred from a particular crypto wallet is seen by everyone within the network. Cryptocurrencies are relatively very new to banking systems, and the crypto-verse remains highly unregulated by international governments. But the fact that transparency in terms of the transaction is possible in the blockchain network is advantageous for law firms because any money transferred or withdrawn fraudulently can be tracked with much ease, and prosecution against the scamster can be initiated exceptionally quickly.
How to gain immunity from crypto rug pulls?
If the way crypto rug pulls occur has frightened you enough to stray away from the crypto-verse, this section will help you understand that protecting your crypto assets is very much possible. Prevention is in itself a cure, and yes, you can become immune to crypto frauds. Just like with money in banking accounts, one can look for safer options for crypto-wallets.
Below we suggest some questions you can ask investors before pushing your assets into an ICO. These questions will assist in you to get better insights into your crypto wallet’s utilization and will simultaneously assist you in avoiding crypto rug pulls:
- Where is my crypto asset being used at?
- What exactly will my crypto-asset be utilized for?
- What is the status of trading data for this ICO, and who verifies it?
- Can you provide me with some financial statements before I invest in this ICO?
- Who audits the financial statements for these transactions?
- Has the ICO been drafted in compliance with securities laws of any particular country or association?
- Could you please provide me with information about the stability of this enterprise?