The crypto scene has had a lot of ups and down since its coming of age, but a new report has shown that May was filled with exit scams, known as rug pulls. A report by blockchain security firm, Beosin, reveals that over $45 million was lost to these exit scams while exploits on DeFi protocols were less than half that amount over the same period.
As the cryptocurrency industry continues to grow, hacks, exploits and other forms of fraudulent activities have accompanied its expansion. Another fraudulent operation in the budding space that has seen a large number of victims is rug pulls.
Rug pulls or exit scams are schemes where crypto founders launch lucrative projects, offer guaranteed returns on investment, let the project gather steam and attention and suddenly leave with investors’ money. This has been on for a while but in the past two months, the rate is becoming increasingly disturbing, and more attention needs to be paid.
More on May’s rug pulls
According to the Beosin report which was published last Thursday, losses from rug pulls and scams reached over $45 million across six incidents in May. The largest of the rug pulls was the $32 million that crypto project, Fintoch, is alleged to have made off with on May 24.
The DeFi project Morgan DF Fintoch promised a daily return on investment (ROI) of 1% and claimed to be owned by Morgan Stanley. The project used a photo of a paid actor on its official website and claimed that he was the CEO. But alas, it was all a hoax.
Beosin wrote in the report:
It further recommended that crypto users raised their anti-fraud awareness and undertake due diligence on a project before investing.
DeFi exploits decline
Unlike the increasing rug pull schemes, the Beosin report states that DeFi hacks have fallen dramatically. There were 10 attacks on DeFi protocols that netted $19.7 million in May, which is a 79% decrease from April.
Also, the report added that losses from these types of exploits had been on the decline for two months and the $7.5 million attack on the DeFi platform Jimbos protocol was the largest attack last month.
The liquidity protocol based on the Arbitrum chain lost 4,090 Ether due to a lack of slippage control of liquidity-shifting operations and the project eventually announced an $800,000 bounty for those tracking the hackers in a bid to bring back the funds.
The shift from DeFi exploits to Rug Pulls
The recent trend has demonstrated that DeFi infrastructure is getting secure (proven by the decrease in the amount lost to attacks) while crypto founders are becoming greedier by preying on the innocence of unsuspecting investors.
As technology is gradually maturing, various cybersecurity experts, white hat hackers, and on-chain sleuths contribute to improving the infrastructure. Also, Major DeFi projects are auditing their smart contracts.
In March, Halborn, a blockchain security firm discovered vulnerabilities that affected Dogecoin and 280 other networks which put over $25 billion worth of crypto at risk. Also, more recently, dWallet Labs discovered a critical vulnerability in the TRON multi-sig wallet and reported it to the team. These measures have made the amounts stolen in DeFi attacks decline.
But the greed of some elements in the crypto space has no limits. These bad actors launch lucrative projects, offer guaranteed returns and conduct a rug pull by disabling their online presence.
Now that this ugly trend is outpacing what was believed to be a threat (DeFi exploits), hopefully, it starts getting the attention it deserves and measures are taken to curtail it.
Get the best of Africa’s daily tech to your inbox – first thing every morning.
Join the community now!