Chibi Finance, an Arbitrum-based yield farming optimizer, reportedly conducted a major exit scam earlier today.
CertiK, a blockchain security firm, confirmed that the developers behind Chibi Finance had stolen approximately $1 million worth of various tokens, according to their analysis of blockchain data shared to the CryptoDaily Editorial team. This factor led to the price of the CHIBI token to plummet by 98%.
Chibi Finance's exit scam unfolded as the developers, having gained control of the platform's smart contracts, proceeded to steal a significant amount of users' funds. The scam was orchestrated using a malicious contract set up by the deployer of Chibi Finance.
By establishing this malicious contract as the _gov address, the developers gained the ability to invoke the panic function. This function enabled them to trigger an emergencyWithdraw of funds to the exit scammer's address.
Approximately 256,012.95 USDC, 94.67 WETH, 4.25520843 WBTC, 115,049 USDT, and 89,563.95 ARB were siphoned off from the project's contracts. The stolen assets were subsequently swapped for 555 ETH, which were then bridged from the Arbitrum network to the Ethereum network. These funds were ultimately laundered through Tornado Cash, a privacy-focused Ethereum mixing service frequently used to obscure transactional activity.
In the immediate aftermath of the scam, the price of the CHIBI token plummeted, registering a staggering 98% drop. Adding to the distressing developments, Chibi Finance also deactivated its Twitter account and took down its official website, thereby leaving no room for doubt about the fraudulent nature of the operation.
The exit scam came as a shock to the users of Chibi Finance, which had launched around April 2023 and had promoted itself as a yield-optimizing service on the Arbitrum chain. In addition to auto-compounded yields, Chibi Finance had touted several other features typically associated with yield farming.
The platform had undergone its first audit on May 31 and had recently reported $500k in Total Value Locked (TVL), with ambitions to reach $1 million. As recent as June 26, Chibi Finance announced that it had been listed on CoinGecko.
Scams on the Arbitrum Network: A Growing ConcernThis exit scam is unfortunately not an isolated incident. CertiK reports that over $14 million has been lost to scams on the Arbitrum network across 12 different instances in 2023 alone. The growing number of such fraudulent activities underlines the need for greater vigilance and more stringent security measures in the decentralized finance (DeFi) space.
These scams, commonly referred to as "rug pulls," typically involve developers gaining legitimacy on social media, hyping up their projects, and raising substantial amounts of money. Once the project's tokens are offered to the public, the developers abruptly withdraw the liquidity, leaving the token holders high and dry.
This incident serves as a cautionary tale, underscoring the importance of thorough due diligence and careful assessment of risk when investing in DeFi projects, especially those operating on relatively new platforms such as Arbitrum. The security and integrity of smart contracts remain crucial factors to consider, and potential investors are advised to be wary of any red flags that may indicate possible fraudulent intentions.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
