Defrost Finance, a decentralized finance protocol, revealed that it got targeted on December 24. However, Peckshield, a blockchain security company, disputed the claims citing that the attack may have been a rug pull that took away about $11 million. In a tweet thread, the Defrost team explained how the first attacker utilized a flash loan to take money out of its V2 product.
In addition, Defrost said that the second attack involved a more significant amount and that the attacker used the owner key to access V1. However, the DeFi protocol, which provides leveraged trading on the Avalanche network, did not mention the amount that got stolen.
Data on Defi Llama shows that in February this year, the total value of funds locked on Defrost Finance stood at $93 million but dropped to about $12 million in recent weeks. The protocol recorded a further drop to $92,000 on December 25 due to the alleged attack.
Two Blockchain Firms Claim Defrost Finance Rug Pulled Its Users
Meanwhile, Peckshield’s investigation indicates that the alleged attackers used a fake collateral token combined with manipulated pricing. A rug pull happens when developers create a liquidity pool and then make away with the money after investors complete purchasing their scam Tokens.
DefiYield, the firm involved in offering a security layer for smart contracts to enable investors to spot a scam project, said it carried out an audit on Defrost Finance about 11 months ago. Yesterday, it explained the smart contract vulnerability that the protocol used rug pull its users.
If this hack is a rug pull, it is a strange one. In a typical rug pull, the developers behind the Ponzi scheme go silent and are unreachable. However, in Defrost Finance case, the team said that it was willing to initiate negotiations with the attackers to return the money. Unfortunately, the protocol disabled Twitter’s direct messages feature; therefore, efforts to reach out for a comment were futile.
Funds Lost to Rug Pulls Could Go Higher in 2022
In 2021, crypto investors lost a collective of $2.7 billion to rug pulls, as per Chainalysis report. Rug pulls accounted for 35% of about 7.5 billion illegal revenue from crypto Ponzi schemes that year. This year’s figure is likely to go up. Solidus Labs, a blockchain risk monitoring company, reports that scammers deployed over 115,000 scam tokens in 2022.
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