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Cryptogambling / Rug Pull: Swaprum DEX Leads to $3M Customer Fund Loss

Rug Pull: Swaprum DEX Leads to $3M Customer Fund Loss

Olumide
Olumide
Publish Date: 21/05/2023
Key Points
  • Over $ 3 million customer fund lost in Swaprum rug pull.
  • Cerik is blamed for signing off the company.
  • Certik confirms Swaprum as a scam.

Over $3 million was lost in a rug pull today and fingers point at Swaprum, an Arbitrum-based decentralised exchange (DEX).

According to sources, the Swaprum Twitter, Telegram and GitHub accounts have been deleted after this event. However, the website is still up and running.

What is a Rug Pull?

A rug pull is a type of scam that happens when a crypto project that seems legitimate collects investment or customer deposits before abruptly closing accounts and disappearing with funds – providing they cover their tracks.

What really happened

According to a tweet on May 19, the rug pulls actors swiped 1,628 Ether which is close to $2.95 million in the current piece.

The money carted away was carried out through Swaprum’s liquidity pool, bridged to  Ethereum and swiped through crypto mixer Tornado Cash.

PeckShieldAlert
2023-05-21 11:23
#PeckShieldAler #rugpull @Swaprum on #Arbitrum rugged ~$3M, $SAPR has dropped -100%. @Swaprum already deleted its social accounts/groups. The scammers have bridged ~1,628 $ETH to #Ethereum and laundered 1,620 $ETH to Tornado Cash https://t.co/tUNgbwGQCd https://t.co/zbwLeCxBeb https://t.co/UH8V9RyFHy
95 22

Soon after this incident, Swaprum’s Twitter, telegram and GitHub accounts were deleted.

Incorporating additional details into the situation, Beosin, a fellow blockchain security firm, asserted that the individual responsible for deploying Swaprum utilized the add() backdoor function to illicitly acquire LP (liquidity provider) tokens entrusted by users. Subsequently, the perpetrator withdrew liquidity from the pool with the intention of maximizing personal gains.

Beosin Alert
2023-05-21 11:23
3/ The backdoor function add() will transfer LP tokens from the contract to the _devadd address. By querying the _devadd address, it will return the ‘Swaprum:Deployer’ address. https://t.co/Z1rZmFSf5R
9 2

Swaprum’s development team allegedly “upgraded the normal liquidity collateral compensation contract to include backdoor functions.”

CertiK Audit Questions Arise Amidst Swaprum Controversy

The crypto community are blaming the recent development on a smart contract auditor, Certik.

Certik had recently conducted an audit on Swaprum as of May 5.

However, the community complaint is bordering on the fact that Certik signed off on the platform by auditing it and Swaprum has the logo “audited by Certik” currently on its website.

Crypto Emprende YT
2023-05-21 11:23
Well done @CertiK another rug that’s comming from your audits. #swaprum @Swaprum #certik #scam #rug https://t.co/cPlyx3GMU6
112 36

CertiK’s disclaimers state that it “conducts security assessments exclusively on the provided source code” and cannot guarantee that its recommendations will be implemented. During the audit, CertiK identified a “major” problem with Swaprum’s centralized nature.

The smart contracts for the project have also been upgraded after the audit, which appears to have included backdoors.

As it stands, CertiK’s website has now flagged Swaprum as an “exit scam.”

What to Keep in Mind about Certik

Earlier this month, Certik freezes $160,000 in a potential Merlin DEX rug pull scam.

Similar to Swaprum, Certik disclosed that Merlin backend teams abused the owner’s wallet, which is consistent with initial investigations that it came from a private key.

Certik further said that there is a need to put smart audit contractors as well as backend teams of these organisations under serious check.

Meanwhile, Certik affirms strongly that they putting in a lot of effort to make audit summaries more clear, especially when it comes to risks associated with centralization, and to better explain audit goals to users and the community.

Conclusion

This is the second rug pull story reported this month and this shows that there are a lot of scams out there leveraging on the customer’s need to make extra cash.  While other news is reporting the effect of regulation on many of these crypto and financial companies, there is also a need to look on the bright side of what this might do to prevent further loss on the part of investors in the crypto community.

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