DeFi
Arbitrum Lender Is Probably An Exit Scam
A new lending protocol on the Arbitrum network could be a fraudulent platform, says on-chain investigator ZachXBT.
Crypto sleuth ZachXBT has exposed new Defi lender Sorta Finance as a possible exit scam and part of a criminal group stealing funds from blockchains. According to ZachXBT, the Arbitrum-based protocol carries the same signature like previous sweepstakes such as Magnate Finance, Solfire and HashDAO.
The modus operandi typically involved duplicating Compound’s lending smart contract on Ethereum Virtual Machine-compatible chains. Malicious developers would then pause the protocol and withdraw users’ deposits from the total value locked.
Community Alert: @Sorta_Finance it is likely that the scam will happen on Arbitrum in the future, so do not use the protocol.
This scammer has already stolen over $25 million with scams like Magnate, Kokomo, Lendora, Solfire, Crolend, HashDAO, etc.
The deployer was recently funded and the first address… pic.twitter.com/JsHGawtQyX
— ZachXBT (@zachxbt) July 25, 2024
According to ZachXBT, malicious actors gained legitimacy on EVM chains and accumulated TVL by hiring shady auditing firms. Low-level crypto influencers were also paid to promote the platforms. The native crypto term for this is a process called “shilling.”
Additionally, the cryptocurrency investigator noted that a Tornado Cash withdrawal funded an early Sorta Finance user. Tornado Cash is a U.S.-sanctioned cryptocurrency crypto mixer used to mask transactions. Lawmakers have often noted that criminals use this tool to hide the source of funds.
As of July 25, Sorta Finance had less than $100,000 in TVL. But ZachXBT pointed out that similar protocols apparently orchestrated by the same person have led to millions in deposits. Blockchain Sherlock Holmes speculated that the individuals behind Sorta Finance and other scams have pocketed over $25 million to date.
Community Alert: The scam group that stole 8 figs with Magnate, Kokomo, Lendora, Solfire, etc. is back with a new project on Blast @Leaperfinance
Last week they funded an address on Blast with about $1 million in laundered funds from previous stacks and began adding liquidity… pic.twitter.com/yqRKvZuuye
— ZachXBT (@zachxbt) April 14, 2024
ZachXBT’s article highlights an emerging trend in cryptography that aims to prevent blockchain crimes before they happen. Individuals and collaborative entities are devoting resources to improving on-chain security by increasing public vigilance.
Companies like Coinbase and initiatives like SEAL 911 have shape Digital Information Sharing and Analysis Centers or ISACs to pool data on hacks, malicious activity and criminal operations to improve the DeFi ecosystem.