In the ever-evolving world of decentralized finance (DeFi), trust remains a cornerstone. However, recent events surrounding Magnate Finance, a DeFi lending platform on the Ethereum Layer 2 network Base, have shaken this trust to its core.
The Heist
Magnate Finance, once a promising DeFi lending protocol, has now become the epicenter of controversy. The platform reportedly executed a rug pull, a term synonymous with crypto projects that vanish after misappropriating user assets. This malicious act led to the loss of a staggering $6.4 million worth of assets from its unsuspecting users.
Magnate Finance on #BASE has rug pulled for $6.4M.
The deployer is also linked to the past rug pulls: 🚨Solfire’s $4.8M rug on Jan 23, 2022 🚨Kokomo Finance’s $5.5M rug on Mar 27, 2023
That makes a total profit of $16.7M for the scammers. https://t.co/jl7rhRnt7C pic.twitter.com/SfL3dk4wW0
— Beosin Alert (@BeosinAlert) August 25, 2023
The Oracle Manipulation
The theft was not a result of a mere system glitch or an external hack. Instead, it was a well-orchestrated move facilitated by a compromised price oracle. By manipulating this oracle, Magnate Finance was able to siphon off user funds. Before the rug pull, data from DeFiLlama showed that Magnate Finance’s total value locked (TVL) stood at around $6.4 million.
The Whistleblowers
Security experts at PeckShield were among the first to blow the whistle on this scam. Their timely intervention unveiled the manipulation of the price oracle, shedding light on the modus operandi of the fraudsters.
However, the preemptive warning signs were already there. On-chain investigator ZachXBT had previously raised red flags about potential issues with Magnate Finance. Drawing parallels between Magnate’s deployer address and a previous exit scam named Solfire from January 2023, which resulted in crypto losses exceeding $4 million, ZachXBT’s warnings now seem eerily prophetic.
The Aftermath
The aftermath of the exposure was chaotic. The Magnate Finance team, in a bid to cover their tracks, began erasing their digital footprint across various platforms, including X (formerly Twitter) and Telegram. Their official website went dark, further amplifying the concerns regarding the platform’s legitimacy.
In a bizarre twist, the Magnate Finance team even responded indirectly to ZachXBT’s warnings, altering their X bio to state “contract breached by Zach.” This was followed by a cryptic exchange with ZachXBT, hinting at some undisclosed plan. However, this interaction was fleeting, as their X account soon went silent, marking an end to any public communication.
A Cautionary Tale
The Magnate Finance debacle serves as a grim reminder of the risks inherent in the DeFi landscape. Base, Coinbase’s Layer 2 network, has not been immune to such incidents. It has witnessed its fair share of rug pulls, including the recent disappearance of nearly half a million dollars due to SwirLend’s abrupt exit in August.
As the DeFi sector continues to grow, it’s crucial for investors to exercise caution, conduct thorough research, and remain vigilant to avoid falling prey to such malicious schemes.
