Magnate Finance, a lending platform operating on Coinbase's Layer 2 protocol Base, has reportedly defrauded its users of $6.5 million. The suspicions were raised by vigorous on-chain investigators like ZachXBT, who had warned the project's founders about sever al actions that could potentially indicate an exit scam.
On August 25, the Magnate Finance protocol took drastic actions, such as deleting its Telegram group and shutting down its website, which immediately sparked concerns among users about the possibility of an exit scam. Additionally, all traces of the project were erased from its X account and other social media platforms.
ZachXBT had alerted Magnate Finance that the address responsible for deploying the protocol was linked to the $4.8 million exit scam associated with Solfire. The situation escalated when the project's developers manipulated the protocol's price oracle and liquidated all assets, leading to the collapse of the protocol's total value locked (TVL), which had been $6.4 million.
The scammers responsible for the fraudulent project quickly moved around $1.34 million worth of Dai. This move was detected by the blockchain analytics firm PeckShield, which tracked the movement of the tokens to a new address beginning with 0x0664. A subsequent transfer of $1 million of the stolen funds was made to the BNB Smart Chain.
The perpetrators behind this rug pull further distributed most of their ill-gotten gains across Ethereum Layer 2 platforms like Arbitrum and Optimism, as well as the BNB smart chain through Stargate. Presently, around 295 ETH and 1.3 million DAI remain on the Base chain.
Exit scams and rug pulls have sadly become quite common tactics employed by scammers in the decentralized finance ecosystem, taking advantage of the decentralized nature of the technology. This alarming trend is reflected in the substantial amount of cryptocurrencies lost, which totaled $656 million due to exit scams and hacks during the first half of 2023.
