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DeFi Protocol Absconds with $1M in User Funds

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ByMarcel Bich

Aug 6, 2023
DeFi Protocol Absconds with $1M in User Funds
Marcel Bich
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According to CertiK, a security analysis firm, Chibi Finance, a second-tier DeFi project on Arbitrum, allegedly stole tokens worth $1 million shortly after its launch.

The developers of Chibi Finance deployed a malicious contract that enabled them to steal user funds from the project’s smart contracts. Onchain analysis revealed that approximately $1 million worth of ETH (555 ether) were taken from the liquidity pools.

Chibi Finance’s team withdrew tokens from user accounts and converted them into ETH. The funds were then transferred from the Arbitrum network to Ethereum and passed through the Tornado Cash cryptocurrency mixer.

After the liquidity pools were emptied, Chibi Finance’s social media accounts, including Twitter and Telegram, became inactive. Furthermore, the project’s website, chibi.finance, is no longer accessible.

The incident resulted in a drastic 99.2% collapse in the price of CHIBI, the native token of the project. Within hours, its value plummeted from $1.62 to $0.01.

Rug Pulling Incidents and Suspicion Surrounding DeFi Projects: Chibi Finance and Swaprum, Merlin’s Sudden Shutdown

This fraudulent act by the Chibi Finance team is a classic example of “rug pulling” in the DeFi space. Similar to the recent case of Swaprum, a project on Arbitrum, where developers disappeared with almost $3 million shortly after passing a CertiK audit. It was later revealed that the Swaprum team frequently utilized Tornado Cash for money laundering. The project swiftly deleted all of its social media accounts following the incident.

In April, Merlin, a decentralized exchange (DEX), abruptly ceased operations after withdrawing $2 million from user funds. The stolen cryptocurrency was allegedly attempted to be sold on centralized exchanges, including Binance. While Merlin representatives acknowledged the hack, they did not provide specific details about the nature of the attack. Some community members suspect the involvement of the Merlin developers themselves in the deception. Notably, CertiK had audited the crypto exchange and expressed no concerns regarding its reliability.

 
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Marcel Bich

Marcel ‘s passion for the world of cryptocurrencies and his comprehensive knowledge of blockchain technology make him an invaluable asset to our team. He stays updated on the latest trends, regulations, and emerging technologies in the crypto space, ensuring that our audience receives accurate and up-to-date information.