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Cryptogambling / Merlin DEX Rug Pull Scam: Certik Freezes $160,000

Merlin DEX Rug Pull Scam: Certik Freezes $160,000

Publish Date: 08/05/2023

$160,000 was reportedly blocked from Merlin, a zKSync-based decentralised exchange which has been the centre of a rogue rug pull that lost users $ 1.8 million last week.

The move which was orchestrated by Certik,ย  a blockchain security firm, shared in the news of its successful $160,000 freeze of stolen funds to its 257,700 followers on May 5.

CertiK
2023-05-04 17:55
We want to provide the community with an update regarding the Merlin DEX incident that took place on April 25th, when Merlin insiders rugpulled their users for $1.8M. ๐Ÿงต๐Ÿ‘‡
240 53

According to the company;

“we have successfully frozen $160k of the stolen funds with the help of partners adding that they’re continuing to monitor the movement of the stolen funds.”

The company stated that while it attempted to “collaborate” with Merlin to retrieve the money stolen from the “rug pull” on April 25, it was unsuccessful.

In an effort to identify the pseudonymous operators, the company decided to contact law police in the United States and the United Kingdom;

“This lack of cooperation has complicated our efforts to validate and aid victims. We are focusing on working with law enforcement and have submitted information to relevant US & UK agencies.”

Certik added that they are all front in exploring all possibilities geared towards fighting scams with the $2M committed.

According to an earlier post, Certik believes that the scams and developers behind it are based in Europe.

CertiK
2023-04-26 17:25
1/ CertiK is exploring a community compensation plan to cover the ~$2M of user funds lost in the Merlin DEX rug pull. Initial investigations indicate that the rogue developers are based in Europe, and we are working with law enforcement to track them down. โฌ‡๏ธโฌ‡๏ธโฌ‡๏ธ
235 84

What was Merlin’s Response?

Merlin in response to the scam issue blames the back-end team saying that they did put a high degree of trust in these teams.

Merlin
2023-04-26 17:47
The wallet _owner/deployer of all effected contracts on ZkSync Mainnet at source are : https://t.co/qyP4tnDU7q https://t.co/Ci0bEGE2Bg
30 30

However, Certik disclosed that these back-end teams abused the owner’s wallet, which is consistent with initial investigations that it came from a private key.

Certik also attributed some blame to themselves noting that they failed to properly inform users of this development.

The company then retreated that they are working tirelessly to improve clarity in the audit summaries especially when it concerns centralization risks and to better communicate with the users and community about the purpose of an audit.

CertiK
2023-05-04 17:56
Although the centralization risks were called out in the report, we didnโ€™t make the impact of these findings as clear as they needed to be. The centralized privileges should have been distinctly highlighted so users were aware of the risks.
25 2

Certik’s Verdicts

Certik following this development said that smart contract auditors should be put under serious scrutiny as they are oftentimes responsible for failing to identify rug pulls.

The firm said;

“Not to identify a possible rug-pull, but to find vulnerabilities is the goal of code audits. It’s crucial to acknowledge that centralization issues have been raised in a huge number of projects, both large and small and that the bulk of them do not lead to a rug pull.”

The company further added that this will help prevent exit scams and assist the community where possible.

Key Takeaway

  • Certik freezes $160k stolen in Merlin DEX rug pull
  • Users lost $ 1.8 million last week to this rug-pull scam.
  • Merlin blames the back-end developers and auditors for putting so much trust in them as regards the scam.
  • Certik emphasizes the need to put smart contract auditors under scrutiny.

Conclusion

Blockchain security is of utmost importance in the decentralized finance space, and the recent incident of the Merlin DEX ‘rug pull’ highlights the need for robust security measures.ย  As the popularity of DeFi continues to grow, it is essential for individuals and institutions to prioritize security and work with reputable security firms to prevent such incidents from occurring in the future. Ultimately, blockchain security is crucial for the long-term success and sustainability of the decentralized finance industry.

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