Arbitrum spirals as customers lose $3 million in a rug pull scam, what next?
- The incident resulted in losses of approximately $3 million.
- DEX volumes on the Arbitrum protocol declined.
In recent months, the Arbitrum protocol experienced a significant surge in popularity, primarily from the highly anticipated introduction of the ARB token. Unfortunately, certain bad actors have taken advantage of the heightened enthusiasm surrounding Arbitrum, employing fraudulent tactics to exploit unsuspecting users.
Is your portfolio green? Check out the Arbitrum Profit Calculator
Users on the Swaprum ecological project within the Arbitrum ecosystem experienced a rug pull incident, leading to a substantial financial loss of approximately $3 million. The project token SAPR’s price fell by 100% following the incident.
For context, a rug pull refers to an act where the creators of a cryptocurrency project abruptly and intentionally drain the project’s funds, leaving investors with worthless tokens and substantial financial losses. It is a deceptive maneuver that results in the sudden collapse of the project and the manipulation of investors’ trust.
PeckShield, a crypto-security firm, reported that the fraudulent individuals responsible for this event laundered a total of 1,620 ETH into Tornado Cash.
Tornado Cash enables the mixing of crypto currency transactions, introducing a layer of privacy. This feature can potentially facilitate money laundering by obscuring the origin of funds through the mixing process.
In response to this unfortunate occurrence, Arbitrum said it will undergo an audit conducted by CertiK.
CertiK is an auditing firm in the crypto space.
Interestingly, the Swaprum project was previously audited by CertiK. The project’s official website still has the “Audited by Certik” stamp on the homepage.
However, after the rug pull occurred, the auditors changed the security score of the protocol on its website to showcase how it is currently unsafe for any user to use the protocol.
Impact on the ecosystem
These events can potentially cause mistrust among users. It can also harm other dApps that are currently being developed within Arbitrum’s budding ecosystem.
The misuse of customer trust by bad actors on the network could exaggerate the decline of Arbitrum’s DeFi activity in the future.
Realistic or not, here’s ARB’s market cap in BTC terms
The DEX volumes on Arbitrum network have declined significantly over the last few weeks. This meant that interest in Arbitrum’s DeFi sector was dropping.
Arbitrum’s TVL also declined, however, the fall in TVL wasn’t as drastic as the decline in DEX volumes.