A new lending protocol on Arbitrum’s network may be a scam platform, says on-chain investigator ZachXBT.
Crypto sleuth ZachXBT has called out newly launched defi lender Sorta Finance as a possible exit scam, and part of a criminal group stealing funds across blockchains. According to ZachXBT, the Arbitrum-based protocol bears the same signature as past rug pulls like Magnate Finance, Solfire, and HashDAO.
The modus operandi usually involved forking Compound’s lending smart contract on Ethereum Virtual Machine-compatible chains. Malicious developers would then pause the protocol and withdraw user deposits from the total value locked.
Community Alert: @Sorta_Finance is likely to exit scam on Arbitrum in the future so do not use the protocol.
This scammer has previously stolen $25M+ with scams such as Magnate, Kokomo, Lendora, Solfire, Crolend, HashDAO, etc
The deployer was newly funded and the first address… pic.twitter.com/JsHGawtQyX
— ZachXBT (@zachxbt) July 25, 2024
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ZachXBT said the bad actors gained legitimacy on EVM chains and accrued TVL by tapping shady audit firms. Low-tier crypto influencers were also paid to promote the platforms. The crypto-native term for this is a process called “shilling.”
Furthermore, the crypto investigator noted that a Tornado Cash withdrawal funded an early Sorta Finance user. Tornado Cash is a U.S.-sanctioned crypto mixer used to obfuscate transactions. Lawmakers have frequently noted that criminals use the tool to hide where funds originated from.
As of July 25, Sorta Finance had less than $100,000 in TVL. But ZachXBT stressed that similar protocols seemingly masterminded by the same person led to millions of deposits. The blockchain Sherlock Holmes surmised that individuals behind Sorta Finance and other scams have pocketed over $25 million to date.
Community Alert: The group of scammers who stole 8 figs with Magnate, Kokomo, Lendora, Solfire, etc is back with a new project on Blast @Leaperfinance
Last week they funded an address on Blast with ~$1M of laundered funds from the previous rugs and have begun adding liquidity… pic.twitter.com/yqRKvZuuye
— ZachXBT (@zachxbt) April 14, 2024
ZachXBT’s post highlights an emerging crypto trend that focuses on preventing blockchain crime before it happens. Individuals and collaborative entities are dedicating resources to improve on-chain safety by bootstrapping public vigilance.
Companies like Coinbase and initiatives like SEAL 911 have formed digital information sharing and analysis centers or ISAC to pool data on hacks, malicious activity, and criminal operations to better defi’s ecosystem.
Read more: Revealed: What causes Bitcoin’s selling pressure
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