I invested in “SafeMoon2026.” The website looked great. The team was “doxxed.” Two days after launch, the liquidity was pulled, the website deleted, and the price hit zero. I called the police and my insurer to report “Theft by Deception.”
Key Takeaways
- Fraud vs. Theft: Insurance covers theft (taking without permission). A Rug Pull is usually classified as “Investment Fraud” or “Voluntary Parting via False Pretense.” You gave them the money; they just didn’t deliver the product.
- The “Speculative Risk” Exclusion: Insurers view buying new tokens as gambling. Gambling losses are never covered.
- Doxxed Teams Don’t Matter: Even if you know who they are, jurisdiction issues (they are in Dubai, you are in Ohio) make legal recovery impossible.
- Rug Pull Insurance (DeFi): Some protocols attempt to cover this, but it is rare. They require the “Deployer Address” to maliciously withdraw liquidity. If the devs just “sell” their tokens slowly (Soft Rug), no trigger occurs.
The “Why” (The Trap)
The trap is “Bad Business Deal.”
Insurance protects assets you have. It doesn’t protect assets you speculated with. When you swap ETH for a Shitcoin, you technically received the coin you paid for. The fact that the coin is now worthless is a market dynamic, not an insurable peril.
The Investigation (I Asked Investigators)
- Blockchain Forensics (Chainalysis): “We can trace the funds to a mixer (Tornado Cash), but we can’t get them back.”
- The Insurer: “We exclude financial loss resulting from dishonesty of a partner or joint venture.”
Comparison Table
| Scenario | Insurance Coverage | Legal Recourse |
| Hard Rug (Liquidity Stolen) | No (Unless DeFi cover bought) | Low |
| Soft Rug (Slow Sell off) | No (Market Loss) | Zero |
| Exchange Exit Scam | No (Insolvency) | Class Action (Years) |
Step-by-Step Action Plan
- Check Liquidity Locks: Before buying, use tools like Unicrypt or Team Finance to see if the developer’s liquidity is locked. If it’s not locked, do not buy.
- [IMAGE: Screenshot of a Liquidity Lock certificate showing ‘Locked for 1 year’]
- Revoke Permissions: After the rug, revoke any approvals so they can’t drain the rest of your wallet.
- Harvest the Tax Loss: The silver lining. You can claim the capital loss on your taxes to offset other gains. Keep the transaction records.
FAQ
Can I claim a “Theft Loss” on taxes?
Consult a CPA. The rules are strict. Usually, it’s a “Capital Loss” ($3k/year limit against income), not a “Theft Loss” (which was removed for individuals).
Is there any insurance for this?
Only “Common Sense” (Prevention). No carrier underwrites memecoins.