Rug pulls analysis: how insiders abuse token mint & admin privileges

Explore how insiders can manipulate token minting and admin rights to orchestrate rug pulls, the risks for investors, and safeguards in 2025 crypto markets.

• Insiders with mint and admin powers can trigger sudden exits.
• Tokenomics design and governance structure matter more than price charts.
• A robust audit culture is essential to protect retail investors.

In recent months, a series of high-profile rug pulls have highlighted the power that project insiders wield when they control token minting functions and administrative privileges on blockchain platforms. This article offers a Rug pulls analysis: how insiders abuse token mint and admin privileges, exploring the mechanics behind these exits and outlining practical safeguards for investors.

The crypto ecosystem has matured, yet many projects still rely on a handful of privileged accounts to manage core functions such as supply expansion and contract upgrades. When those custodians act maliciously—or are compromised—investors can lose exposure almost instantaneously. Understanding the technical pathways that enable these attacks is crucial for anyone looking to participate in tokenized assets, whether they are digital collectibles or real‑world property tokens.

For retail investors navigating the expanding universe of tokenised real‑world assets (RWA), recognising the red flags associated with minting controls and admin privileges can mean the difference between a sustainable investment and a sudden exit. This piece will walk through the underlying mechanics, market implications, regulatory environment, and practical steps to mitigate risk.

Background & Context

A rug pull is an orchestrated exit where project insiders siphon funds or tokens, leaving remaining holders with little or no value. Historically associated with early-stage DeFi projects, the phenomenon has evolved as tokenised real‑world assets and DAO governance models proliferate.

Central to many rug pulls are two technical levers:

• Token mint functions: The smart contract code that creates new tokens. If a single or small group of addresses can trigger minting arbitrarily, they can inflate supply to dilute holders.
• Administrative privileges: Owner or admin roles that allow contract upgrades, pausing operations, or transferring funds without community consent.

In 2025, increased regulatory scrutiny (MiCA in the EU, SEC enforcement in the U.S.) has forced many projects to adopt more transparent governance frameworks. Yet, the speed of product development and the decentralised ethos still leave room for privileged accounts that can be abused if not properly audited or delegated.

Key players in the current landscape include:

• DAO platforms such as Aragon, DAOstack, and Gnosis Safe, which centralise governance via token voting but often retain a small set of privileged operators.
• Tokenisation protocols like RealT, Harbor, and Eden RWA that bridge physical assets to ERC‑20 tokens. These projects must balance on-chain transparency with off-chain legal compliance.
Regulators such as the SEC’s “Howey Test” guidance and MiCA’s asset‑class definitions, which shape how token issuers structure admin roles.

How It Works: From Mint to Exit

The typical rug pull sequence involves several stages:

1. Initial mint: The project releases a base supply of tokens. Insiders hold large quantities or have the ability to mint more.
2. Accumulation phase: Over weeks, insiders buy additional tokens on exchanges or through private deals, often using inflated prices.
3. Triggering admin functions: Once a critical mass is reached, insiders execute an owner-only function—such as pausing trading, redirecting treasury funds to personal wallets, or launching a new token that renders the original worthless.
4. Liquidity drain: The contract may withdraw liquidity from automated market makers (AMMs), effectively removing market depth and forcing holders to sell at a steep discount.
5. Exit & washout: After draining funds, insiders liquidate their holdings. Remaining investors are left with devalued or worthless tokens.

Key actors:

• Issuer/Owner: Holds privileged rights to upgrade contracts or mint new supply.
• Custodian Wallets: Secure storage for treasury funds and large holdings. If compromised, the entire token economy can collapse.
Community: Token holders who rely on transparent governance but often lack technical expertise to spot subtle code changes.

Market Impact & Use Cases

While many rug pulls are isolated incidents, their ripple effects influence the broader tokenisation market. For example:

• RealT’s 2023 incident: A temporary admin lock caused a 70% drop in property token prices, eroding investor confidence.
• Arbitrum DAO hack: Compromised owner keys led to the theft of $12M worth of ether, prompting stricter multi‑sig requirements across the network.
• Eden RWA’s governance model (discussed in depth below) demonstrates how a balanced “DAO-light” approach can mitigate abuse while maintaining operational efficiency.

Risks, Regulation & Challenges

Despite the promise of tokenisation, several risks persist:

• Smart contract vulnerabilities: Reentrancy bugs or unverified admin functions can be exploited.
• Custodial risk: If a single key controls treasury funds, a breach or insider theft is catastrophic.
• Liquidity constraints: Tokenised assets often lack deep secondary markets, making exits difficult.
• Legal ownership ambiguity: Physical asset title may not fully align with token ownership records.
• KYC/AML compliance: Rapid onboarding can bypass regulatory checks, exposing projects to sanctions.

Regulators are tightening scrutiny. The U.S. SEC has issued guidance on “security tokens,” and MiCA requires clear asset classification in the EU. Projects that fail to comply risk enforcement actions or delisting from exchanges.

Outlook & Scenarios for 2025+

Bullish scenario: Robust multi‑sig wallets, community audits, and on-chain transparency lead to increased investor confidence. Tokenised real estate platforms like Eden RWA scale, offering stable yield streams and liquidity via secondary markets.

Bearish scenario: Continued abuse of admin privileges coupled with regulatory crackdowns drives many projects into bankruptcy or forced liquidation. Retail investors face higher volatility and reduced access to quality RWAs.

Base case: A moderate adoption of best‑practice governance (multi‑sig, audit trails) mitigates extreme events while still allowing growth. Investors who conduct due diligence on admin structures will likely fare better than those who ignore technical details.

Eden RWA: A Concrete Example of Responsible Tokenisation

Eden RWA is an investment platform that democratizes access to French Caribbean luxury real estate—Saint‑Barthélemy, Saint‑Martin, Guadeloupe, Martinique—by combining blockchain with tangible, yield-focused assets. The platform issues ERC‑20 property tokens representing fractional ownership of a dedicated SPV (SCI/SAS) owning a carefully selected villa.

Key features:

• ERC‑20 tokens: Each token is fully on‑chain, auditable, and tradable on Ethereum.
• SPV structure: The property is held in an SPV that ensures legal ownership separate from the token holders.
• Rental income in USDC: Periodic payouts are automatically distributed to investors’ wallets via smart contracts.
• Quarterly experiential stays: A bailiff‑certified draw selects a token holder for a free week in the villa, adding utility and community engagement.
• DAO‑light governance: Token holders vote on key decisions (renovation, sale) with a balanced oversight model that reduces the risk of unilateral admin abuse.

If you are interested in exploring how tokenised real‑world assets can provide stable, income‑generating exposure, consider reviewing Eden RWA’s presale information. Learn more about the project and its governance framework at https://edenrwa.com/presale-eden/ or explore the presale details directly via https://presale.edenrwa.com/.

Practical Takeaways

• Verify that a project’s mint function is capped or requires multi‑sig approval.
• Check for audited smart contracts and third‑party security reviews.
• Assess the distribution of admin keys; ideally, they should be held by multiple independent parties.
• Look for transparent treasury reports and clear audit trails on token transfers.
• Understand how off-chain legal agreements (SPVs, title deeds) align with on-chain ownership.
• Monitor regulatory updates—especially MiCA guidance and SEC enforcement actions affecting tokenised assets.
• Engage with community forums to gauge sentiment and identify potential red flags early.
• Use tools like Etherscan’s “Contract” tab or third‑party audit sites (Certik, OpenZeppelin) to inspect code.

Mini FAQ

What is a rug pull in the context of tokenised assets?

A rug pull occurs when project insiders with privileged control over minting or administrative functions drain funds or manipulate supply, leaving remaining holders with little or no value.

How can I identify if a token has a risky admin structure?

Check the contract’s source code for an owner() or admin() function that is not protected by multi‑sig or time‑locked mechanisms. Look for audit reports that specifically assess privilege escalation risks.

Does tokenising real estate eliminate rug pull risk?

No, but a well‑designed governance model—such as Eden RWA’s DAO‑light structure and SPV ownership—significantly reduces the likelihood of insider abuse.

What role do regulators play in preventing rug pulls?