Scammers Lurk Behind DeFi Protocol: Warning from Crypto Sleuth

Blockchain investigator ZachXBT has issued a warning about a group of scammers who are involved in a new fraud scheme using stolen funds. The group, known as Leaper Finance, operates a lending protocol based on Blast. ZachXBT’s investigation uncovered that Leaper Finance is responsible for several rug pulls, including those that targeted users of Magnate ($6.5 million), Kokomo ($4 million), Solfire ($4.8 million), and Lendora. The group is also believed to have scammed Hash DAO, Glori Finance, and ZebraDAO, resulting in losses totaling over $20 million.

A rug pull occurs when the developers of a blockchain protocol suddenly withdraw all funds from a liquidity pool or project wallet, leaving investors with worthless assets. In this case, Leaper Finance funded a Blast network address with almost $1 million that had been laundered from previous scams, thereby increasing liquidity to attract more victims. Once the connection between Leaper Finance and the scams was exposed, the group responded by harassing ZachXBT and announcing a ‘token launch’ while referencing the North Korean hacker group Lazarus.

As a result, both Leaper Finance and Glori Finance accounts on the social media platform X have been deactivated, and their websites have been taken offline. According to a research report by Immunefi, a blockchain security firm, more than $200 million worth of cryptocurrency was lost to hacks and rug pulls in the first two months of 2024, involving a total of 32 incidents.

ZachXBT’s investigation shows a pattern of behavior by Leaper Finance, whereby they allow the total value locked (TVL) to grow to a significant amount before absconding with all the funds and fabricating Know Your Customer (KYC) documents. The group also relies on low-tier audit firms to give an illusion of security. Their scams have now expanded to different blockchain networks, including Base, Solana, Scroll, Optimism, Arbitrum, Ethereum, Avalanche, and others.

This latest revelation serves as a reminder of the risks associated with investing in decentralized finance (DeFi) projects. Despite the growing popularity of this sector, investors must exercise caution and conduct thorough due diligence before committing funds. The prevalence of rug pulls and other fraudulent activities highlights the need for stricter regulations and increased security measures within the DeFi space.

It is crucial for users to verify the authenticity of projects and lending protocols before depositing funds. Relying on reputable audit firms and conducting extensive research on the team behind the project can help minimize the risk of falling victim to scams. Taking these precautionary measures can protect investors from significant financial losses and contribute to the long-term sustainability and legitimacy of the blockchain industry.