Defrost Finance Hacked in Attack Some Say May Have Been a Rug Pull

Defrost Finance Hacked in Attack Some Say May Have Been a Rug Pull

Protocol for decentralized finance Defrost Finance reported being hacked on Friday, however, blockchain security firm PeckShield said, citing “community intel,” that the attack might have been a scam that stole $12 million, while Certik, another security business, claimed it had been unable to get in touch with the team. The Defrost team claimed in a tweet thread on Sunday that the first attack used a flash loan to siphon money from its V2 product. The more significant attack was the owner key was used to exploit V1 in a second. Moreover, the leveraged trade protocol on the Avalanche blockchain didn’t specify how much money had been taken.

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Considering PeckShield’s study, the assault made use of a bogus collateral token and manipulated price. The developers, when constructing and setting up a liquidity pool and then take the money out and vanish after investors have purchased the linked token, this is known as a rug pull or exit scam. As per the Defi Llama data, the total amount of money held on Defrost Finance, which peaked at $95 million in February, has recently been around $13 million. On Sunday, that decreased to less than $93,000.

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If a rug pull is an attack, that would be unique as typically, the group responsible for the scheme disappears and cannot be reached. Defrost Finance, on the other hand, tweeted about the incident and stated that it would be open to negotiating a return of the monies with the perpetrators. Nevertheless, a Twitter attempt to contact the company was unsuccessful due to the account’s disabling of direct messages. On Monday, Certik tweeted that it had contacted various team members but had received no answer. According to a graphic that was included, DeFrost was an exit scam.

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Delfield, a company that provides a security layer for smart contracts to protect investors from fraud and hacks, claimed to have audited Defrost Finance a year ago and identified the smart contract weakness that was exploited in the breach. As per the research by Chainalysis, crypto investors lost over $2.8 billion to rug pullers last year. However, 37% of the more than $7.7 billion in criminal profits generated by cryptocurrency schemes that year came from rug pulls. According to research from blockchain risk monitoring company Solidus Labs, fraudsters distributed more than 117,000 scam tokens until December 1, 41% more than they did in all of 2021. This suggests that the 2022 figure will be greater.

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With the accusation, the team is unsatisfied, and earlier on December 28, it issued a warning to members of its Telegram channel that it would delete anyone who try to spread the “false narrative” that Defrost team was behind the recent attacks. At the moment, continuing to let the public discussions function like the Wild Wild West is not conducive to moving ahead.

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Will put into practice Therefore, after publishing on Medium a few hours later that it has started the process of repaying payments to affected individuals, Defrost shared on Twitter on December 26 that it had been fruitful in recovering every penny stolen in the v1 attack. The Defrost-controlled Ethereum wallet used to facilitate the return of funds now displays that $2.9 million in Ether ETH and $9.9 million in Dai DAI have been returned.

The hacked funds have been returned to #DefrostFinance.

The affected users will very soon be able to claim their assets back.

Details 👇

— Defrost Finance 🔺 (@Defrost_Finance) December 26, 2022

In recent reports on Defrost Finance, there are a few things we’d like to talk about and we also regret that we are unable to go into more detail, but the community will see that this is a subtle situation and that is helping our users get their money back must be our top priority. This takes preference over all other considerations, it stated.

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About Maria Morgan

Maria Morgan is a full-time cryptocurrency journalist at Coinography. She is graduate in Political Science and Journalism from London, her writing is centered around cryptocurrency news, regulation and policy-making across the glob.

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