Understanding Rug Pulls: An In-depth Behavioral Analysis of Fraudulent NFT Creators

Abstract

The explosive growth of non-fungible tokens (NFTs) on Web3 has created a new frontier for digital art and collectibles and an emerging space for fraudulent activities. This study provides an in-depth analysis of NFT rug pulls, the fraudulent schemes that steal investors’ funds. From a curated dataset of 760 rug pulls across 10 NFT marketplaces, we examine these schemes’ structural and behavioral properties, identify the characteristics and motivations of rug pullers, and classify NFT projects into 20 groups based on creators’ association with their accounts. Our findings reveal that repeated rug pulls account for a significant proportion of the rise in NFT-related cryptocurrency crimes, with one NFT creator attempting 37 rug pulls within 3 months. Additionally, we identify the largest group of creators influencing the majority of rug pulls and demonstrate the connection between rug pullers of different NFT projects using the same wallets to store and move money. Our study contributes to understanding NFT market risks and provides insights for designing preventative strategies to mitigate future losses.