Standing as an epitome of the potent challenges in the nascent world of decentralized finance (DeFi), the Ethereum Layer 2 lending project – SwirlLend, operating on the Base and Linea networks, allegedly orchestrated an exit scam. Users suffered an enormous loss with the withdrawal of total user deposits surmised to approximately $460,000.
The reveal came into the light following astute on-chain scrutiny undertaken by the cyber-security firm PeckShield. They reported the alleged SwirlLend team was behind the removal of almost $290,000 and $170,000 from the Base and Linea network respectively. These assets, in turn, were strategically redirected to the Ethereum blockchain adding another layer of complexity.
Spiraling down, the event mysteriously coincided with the user deposit figures on SwirlLend which nosedived from a towering $780,000 to a perplexing $49. It’s not one but several red flags raised the skepticism of an exit scam. Notably, the social media presence of SwirlLend erased overnight from platforms like Twitter and Telegram. The project’s official website vanished into thin air intensifying the uncertainties surrounding this event.
As veterans following the cryptographic space might be familiar, this event is not unique. In fact, PeckShield branded it as a “rug pull” – a term that has gained infamy in the crypto spectrum, where developers abandon a project high and dry, running away with the funds unsuspecting users entrusted on the platform.
The current debacle underscores one of the high-profile rug pulls that took place on the Base network recently. It involved the once glowing Bald memecoin, boasting an impressive $85 million valuation, which tragically crashed to near-zero marks following its developer’s strategic exit from the primary pool.
It’s a sobering reality check of the inherent risks that co-exist in the transformative yet vulnerable decentralized finance ecosystem. While DeFi may very well revolutionize legacy financial systems, the sour taste from episodes like these underlines the necessity for thorough due diligence and exercising caution when dabbling with these projects. In the end, it is a stark reminder of the old adage – ‘Caveat emptor’ or ‘Buyer Beware’.