Who pulled the first rug?

Who pulled the first rug?
Robert Holloway examines the history of rug pulls.
What you'll learn
  • Rug pulls have become a scourge upon crypto.
  • Where does the phrase come from?
  • Our ombudsman digs into its history.

Robert Holloway is a columnist and an award-winning ombudsman at DL News. Views expressed are his own.

As several correspondents for DL News have reported, the recovering crypto industry remains plagued by what is known as rug-pulling.

The expression, in the sense of fraudulent action, is peculiar to crypto and very new. It is worth asking where it came from.

Nigeria-based DeFi correspondent Osato Avan-Nomayo defined it in his report “BNB Chain attacks continue to rise but losses dropped to $161m last year” on January 22:

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“Rug pulls happen when the creator of a project withdraws all or most of the liquidity, including the deposits made by investors, leaving token holders in the lurch.”

In an earlier story, “DAO raiders accuse Hector Network of ‘slow-rugging’ investors as treasury dwindles” on June 27, Osato explained the difference between slow and hard rugging.

“In contrast to a hard rug where the developer team runs off with the project’s funds, slow rugging is when a team fails to deliver useful products that create value for token holders,” he wrote.

“As a result, the team steadily drains the treasury by dispensing high salaries to team members and leaving token holders with worthless ‘coins.’”

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As Canada-based researcher Tyler Pearson noted in “Hackers raided crypto for $1.7bn in 2023 – check out the top 10 heists of the year,” the third-largest loss of 2023, amounting to $126 million, was incurred by the cross-chain bridge protocol Multichain, which “suffered a hack or rug pull in July when the project’s private keys were compromised.”

The term rug pull is so recent it is not defined in either of the leading dictionaries of American and British usage, Merriam-Webster and the Oxford English Dictionary, respectively.

The OED does, however, include the expression to pull the rug from under someone.

It gives the meaning as to withdraw support abruptly or unexpectedly from; to let down, betray.

The earliest recorded use of the term dates from 1928 in the Davenport (Iowa) Democrat and Leader newspaper, which reported that “Governor Ritchie of Maryland pulled the rug out from under all the political bigots Wednesday evening in his speech in Chicago.”

Albert Ritchie won a record four terms as governor of Maryland and served from 1920 to 1935.

Unfortunately, the OED does not give the context for the quote, but 1928 was the year Ritchie abandoned his presidential ambitions after unsuccessful attempts to win the Democratic Party nomination in 1920 and 1924.

The notion of betraying or withdrawing support for bigots sounds odd. It seems more likely that Ritchie’s speech in Chicago gave bigots a rug pull as defined in the non-crypto sense by the online Wiktionary: “a sudden revelation that completely contradicts the assumptions one has been led to believe.”

Wiktionary also defined rug pulls in crypto terms as “a fraud scheme where anonymous founders trick people into investing money for a cryptocurrency project which is then abandoned.”

Rug pull came to denote the twist or surprise ending of a television commercial.

In 1995, the company L & F Products sued Proctor & Gamble for an ad which, it alleged, implied that a bathroom detergent manufactured by L & F failed to clean properly.

In a judgement quoted by Wiktionary, the US Court of Appeals for the Second Circuit rejected the claim that “the ‘rug-pull effect conveys the false message” complained of.

The earliest recorded use of rug pull in the sense familiar to crypto enthusiasts was in an article published on March 2, 2022 by The New York Times, again according to Wiktionary.

“The anonymous founders of a crypto collective called AnubisDAO raised nearly $60 million in a few hours last year; less than a day later, the funds disappeared in the second-largest rug pull of 2021, according to the blockchain-tracking firm Chainalysis,” the report said.

It is curious that no one seems to have thought of the metaphor sooner.

Rugs have existed for centuries and at some point someone must have done a literal rug pull, as in the opening scene of the unjustly neglected movie “Start the revolution without me.”

Released in 1970, the comedy stars Gene Wilder and Donald Sutherland, each playing two roles as identical twins who are mixed up at birth two decades before the French Revolution.

Arriving by night at a lonely inn, the Duke de Sisi calls for a doctor for his pregnant wife.

When he learns that the doctor is already attending a local woman, the nobleman draws his sword and tells her husband: “Stand aside peasant, or you’ll feel three feet of cold steel.”

Pulling a dagger from his belt, the peasant replies: “Move any closer and you’ll get 10 inches of forged iron.”

The duke raises a pistol, saying: “Not before you get two ounces of molten lead.” He unwittingly steps onto a carpet.

“Unless of course I give you three feet of Persian rug,” says the peasant. He stoops, pulls the rug and the duke falls to the floor.

When they are not being dragged from under your feet, rugs are associated with warmth and comfort.

According to the OED, rug meant a thick woollen blanket or wrap, used for bedding or worn when travelling, as early as 1591, more than two decades years before it also came to mean a small carpet or floor covering.

Perhaps by extension, it was later adopted by gamblers to mean safe and secure. The OED quotes the phrases “it’s all Rug, the Game is secured” (1699) and “Fear nothing, Sir; Rug’s the word, all’s safe” (1705).

Benjamin Franklin had security, if not comfort, in mind, in 1772 when he wrote an epitaph for a friend’s pet squirrel: “Here lies Skugg, as snug as a bug in a rug.”

More than four centuries before that, however, the verb meant to pull, tug or tear a person or thing, violently and forcibly. And the now obsolete expression rug and reave meant to commit robbery, to plunder and pillage.

A false sense of security; sudden withdrawal of support; frustrated expectations; betrayal. There’s a range of associated meanings behind the term rug pull.

Interested in the language of crypto? If so, you can contact me at robert@dlnews.com

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