Deciphr Academy
Track 2 · Module 10 · Lesson 5 of 7 · 8 min read

What are rug pulls, pump-and-dumps and "pig butchering" scams?

Short answer

In a rug pull, a project's creator collects money and then abandons the project and keeps it.1 In a pump-and-dump, promoters hype an asset and sell into the rise.2,3 "Pig butchering" is a long investment scam that builds trust before steering the victim to a fake platform. The FBI says crypto investment fraud was the biggest source of losses to Americans in 2025.4,5

Rug pullbuyers pay inproject abandonedmoney keptPump and dumphype onlineprice jumpsorganisers sell firstPig butcheringfriendly contacttrust, fake profitsfees to withdrawNone of them needs any hacking
Fig. 5. Three scams, three shapes. A rug pull vanishes with the money. A pump-and-dump sells into the hype. Pig butchering fattens the victim with fake profits first.

Rug pulls

US prosecutors in New York, writing in March 2022, described a "rug pull" as a project whose creator asks for investments, then suddenly abandons the project and keeps the investors' money.1 Module 14 looks at rug pulls in NFT projects.

The FTC warns that scammers pose as new or established businesses issuing their own coin or token. Its advice is to research online whether the company really has issued one.6

Pump-and-dumps

The SEC's investor website describes a "pump and dump" in two parts. First, promoters push up a stock's price with false or misleading claims. Then they sell their own holdings into the rise.2 Once they stop the hype, the price usually falls, and investors lose money.2

The CFTC, a US markets regulator, warned in 2018 that the same fraud was being run with little-known crypto tokens.3 Organisers coordinate anonymously and hype the tokens on social media.3 In one example it gave, the whole buy-and-sell cycle was over in less than eight minutes. It says the people pulling the strings usually get out first.3

The CFTC's advice: don't buy tokens because of social media tips or sudden price spikes.3 It adds that market manipulation is against the law, and many people who take part end up losing money.3

"Pig butchering"

FinCEN, the US Treasury's financial crimes unit, says these scams are called "pig butchering" because they resemble fattening a hog before slaughter.4 It says they are largely run by criminal groups based in Southeast Asia.4 The FBI says these groups use victims of human trafficking as forced labour to run the scams.5

FinCEN and the FBI describe the same stages.4,7,8

  1. Contact. Often a "wrong number" text, or a message claiming to be an old friend.4 The FBI says first contact comes by text, social media, adverts or dating apps, then moves quickly to a messaging app.5
  2. Trust. The scammer builds a relationship over time, sometimes a romance.8
  3. The pitch. The victim is steered to a fake investment website or app that the scammers control.8
  4. Fake profits. The site shows big gains. The scammer may even allow a small withdrawal, to build confidence.4
  5. The trap. When the victim tries to take money out, they are told to pay "taxes" or fees first. Paying doesn't get the money back.7,8

The FBI calls crypto investment fraud the highest source of financial losses to Americans in 2025. Its report's summary gives $7.2 billion, and its crypto table $7.28 billion.5 Chainalysis says pig butchering and "high-yield investment" scams remained the main scam types by volume in 2025.9

Variations on the theme

  • Fake "liquidity mining". The FBI warned in 2022 of scammers promising returns of 1% to 3% a day, then draining victims' wallets through permissions they had approved. It linked over $70 million of losses since January 2019 to this scam.10
  • Fake play-to-earn games. Victims "earn" fake rewards in a game, then their wallets are drained.11

Red flags from official sources

  • Guaranteed returns. The FTC says only scammers guarantee profits or big returns.6
  • Dating and investing. The FTC says never mix online dating and investment advice.6
  • Advice from strangers. The FBI says don't invest on the advice of someone you have met only online.8
  • Fees to withdraw. The FBI says don't pay extra fees or "taxes" to get your money out.8
Our viewNone of these scams needs any hacking. They need patience, a believable story and a victim in a hurry to get rich, or to get their money back.
Sources
  1. Two defendants charged in non-fungible token ("NFT") fraud and money laundering scheme. US Department of Justice, US Attorney's Office for the Southern District of New York (read through the Internet Archive copy of 11 December 2025, as justice.gov showed a bot check), 24 March 2022.
  2. Pump and Dump Schemes. Investor.gov, US Securities and Exchange Commission, checked 22 October 2026.
  3. Customer Advisory: Beware Virtual Currency Pump-and-Dump Schemes. US Commodity Futures Trading Commission (CFTC), February 2018.
  4. FinCEN Alert on Prevalent Virtual Currency Investment Scam Commonly Known as "Pig Butchering" (FIN-2023-Alert005). US Treasury, Financial Crimes Enforcement Network (FinCEN), 8 September 2023.
  5. 2025 IC3 Annual Report (Internet Crime Report). FBI Internet Crime Complaint Center, 2026, covering 2025.
  6. What To Know About Cryptocurrency and Scams. US Federal Trade Commission, Consumer Advice (read via the Internet Archive copy of 18 October 2026, as the live page refused automated access), May 2022.
  7. Cryptocurrency Investment Schemes (Alert I-100322-PSA). FBI Internet Crime Complaint Center, with the FBI Miami Field Office, 3 October 2022.
  8. The FBI Warns of a Spike in Cryptocurrency Investment Schemes (Alert I-031423-PSA). FBI Internet Crime Complaint Center, 14 March 2023.
  9. Record $17 Billion Estimated Stolen in Crypto Scams and Fraud in 2025 as Impersonation Tactics and AI Enablement Surge (2026 Crypto Crime Report). Chainalysis, a blockchain analytics firm, 13 January 2026.
  10. Scammers Target and Exploit Owners of Cryptocurrencies in Liquidity Mining Scam (Alert I-072122-PSA). FBI Internet Crime Complaint Center, 21 July 2022.
  11. Criminals Steal Cryptocurrency through Play-to-Earn Games (Alert I-030923-PSA). FBI Internet Crime Complaint Center, 9 March 2023.
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General education built from the publicly available sources listed above. Not financial, legal, tax or investment advice. Naming a company, project or regulator is not an endorsement either way. Last checked 2026-10-22. Terms and disclaimer.