Coinbase‘s Layer-2 protocol, Magnate Finance, a lending and borrowing platform, pulled out $6.5 million in user assets with a rug-pull after researchers on the chain, such as ZachXBT, warned about the possibility of an exit scam due to various actions by the project’s founders. Blockchain analytics firms have traced part of the stolen funds to be transferred to the BNB Smart Chain. Rug-pull fraud has become a widespread problem in the decentralized finance world and has resulted in significant losses in 2023.
Earlier on August 25, Magnate Finance had deleted its Telegram group and taken its website offline, increasing concerns among users about a potential rug-pull fraud. Magnate Finance also deleted its X account and removed all possible social media presence. ZachXBT had reported that the Magnate Finance distribution address was directly linked to a $4.8 million exit scam involving Solfire.
Just hours after deleting the Telegram group and shutting down their website, the project developers removed all assets by manipulating the price data of the protocol, causing the total value locked (TVL) of $6.4 million to collapse.
Blockchain analytics firm PeckShield reported that the scammers behind the project transferred Dai tokens worth $1.34 million to a new address starting with 0x0664 and then bridged $1 million of the stolen funds to the BNB Smart Chain. PeckShield also tracked five different wallets associated with the Magnate Finance scammers.
The fraudster behind the rug-pull transferred a significant portion of the proceeds to the BNB Smart Chain through Ethereum Layer-2 platforms Arbitrum and Optimism via Stargate. Currently, approximately 295 Ethereum and 1.3 million DAI are still held on the Base network.
Rug-pull fraud has become a widespread tactic in the decentralized finance ecosystem, thanks to the ease brought about by decentralization. This is evident from the total value of lost cryptocurrencies due to rug-pull fraud and hacking, which amounted to $656 million in the first half of 2023.