The engineer hired to secure a token's liquidity rug-pulls it himself
Eric Zhu, a New York-based blockchain engineer hired to work on the "Game Coin" (GME) token, kept exclusive, undisclosed control of the liquidity provider tokens the project had publicly claimed were "locked" against insider withdrawal. He used that access to drain roughly $553,000 in crypto assets in January 2025, causing the token's price to fall by about 12%. The SEC charged him with securities fraud and settled for a disgorgement and civil penalty totalling nearly $823,000, which Zhu agreed to pay without admitting or denying the allegations.
- Year
- 2025
- Where
- United States
- Outcome
- Settled
- Reported loss
- $553,000
- Victims
- Not stated in the sources
- Schemes
- NFT and crypto token rug pulls
- Last reviewed
- 2026-09-16
The facts, as recorded
- Eric Zhu was hired as a blockchain engineer for Game Coin, LLC, whose GME token was offered and sold as a security.
- Game Coin publicly represented on social media that liquidity was "locked," meaning insiders could not withdraw the funds backing the token's trading pool.
- Zhu, however, retained exclusive control of the liquidity provider (LP) tokens at a blockchain address he did not disclose, and kept them unlocked rather than genuinely locked.
- He used that access to execute a rug pull, misappropriating approximately $553,000 in crypto assets and causing GME's price to fall by roughly 12%.
- The SEC filed suit on 16 January 2025 in the Middle District of Florida (case 3:25-cv-00054), charging violations of Securities Act Section 17(a)(1) and (a)(3) and Securities Exchange Act Section 10(b) and Rules 10b-5(a) and (c).
- Zhu agreed to pay disgorgement and prejudgment interest of $672,992 plus a $150,000 civil penalty — about $822,992 total — subject to court approval, without admitting or denying the SEC's allegations.
- The case was investigated by the SEC's Crypto Assets and Cyber Unit and its Miami Regional Office.
Why this case matters
Every other rug pull on this site’s pages involves an outside promoter deceiving investors from the start. This one is different: the person who executed the rug pull was the insider specifically hired to make the project’s liquidity claim true, and used that position of trust to make it false instead.
The mechanism, precisely
“Locked liquidity” is a real, checkable technical safeguard against exactly this kind of theft — when implemented correctly, it prevents anyone, including the team, from withdrawing the funds backing a token’s trading pair for a set period. Game Coin publicly claimed to have it. Zhu’s undisclosed control of the LP tokens meant the claim was false the entire time investors relied on it.
A civil case, not a criminal one
Unlike the other cases on this scheme’s pages, this is a Securities and Exchange Commission civil enforcement action, not a Justice Department criminal prosecution — the consequence is a monetary judgment rather than a prison sentence, and it turns on whether the GME token counts as a security, a question the SEC’s complaint answers by charging it as one.
The caveat
This is a settled civil matter in which Zhu neither admitted nor denied the SEC’s allegations, and the settlement remained subject to court approval as of this page’s last review. No criminal charges are reported in the source reviewed for this page.
Sources
- SEC v. Eric Zhu — Litigation Release No. 26223. US Securities and Exchange Commission. Accessed 2026-09-16. Supports: Defendant name, role, the GME token and "locked liquidity" claim, the LP token mechanism, the $553,000 and 12% figures, the filing date and case number, the statutory charges, and the settlement terms.