A recent study conducted by a team of researchers at the Indian Institute of Technology has revealed the underlying dynamics and behavioral patterns of creators involved in NFT rug pulls.

The study analyzed a dataset of Ethereum transactions on the OpenSea marketplace between June 2021 and December 2022, focusing on the similarities between various rug pull incidents.

The researchers categorized 727 NFTs into 20 groups, including a group dubbed the “Rug pull Mafia,” which consists of 168 tokens linked to multiple and repeated rug pulls. This group was the primary focus of the study, as the researchers aimed to gain meaningful insights into the dynamics of NFT rug pulls.

Several parallels were discovered in the rug pullers’ behavior, such as the use of temporary accounts to conceal creators’ direct interactions with VASPs or illicit accounts. The study also found that the initial source of funds and the interconnectedness of several rug-pullers were common factors across different incidents.

The researchers inferred that it is relatively easy for an average programmer to attempt a rug pull, as rug pullers often employ similar tactics and cloned or copied projects. They determined that cryptocurrency exchanges and OpenSea royalties were the main sources of funding for these fraudulent schemes.

The findings of this study contribute to the current understanding of NFT collection creators’ transaction tendencies, which have been previously explored in the literature. The researchers suggested several future research directions, including extending the analysis to include exchanges for determining the complete trail of fund transfers and incorporating different types of illicit addresses, such as those involved in Darknet and gambling activities.

By examining transaction patterns, the researchers hope to develop robust machine-learning models capable of detecting groups of creators attempting repeated rug pulls. In addition to rug pulls, analyzing these patterns could also help identify actors involved in money laundering and wash trading.

This groundbreaking study is expected to pave the way for a better understanding of the self-organization aspects of emergent NFT marketplaces, while providing valuable insights for regulators and investors to mitigate the risks associated with rug pulls and other malicious activities.