Following the alleged "rug pull" the CHIBI token price dropped by 99%.
The newly launched Arbitrum-based decentralized finance (DeFi) platform, Chibi Finance, is now entangled in controversy as its developers allegedly stole over a million dollars in various tokens, leaving users high and dry.
Shortly after it went live on June 27th, the user funds seemingly vanished into thin air, getting transferred rapidly to other networks.
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Chibi Finance claimed to be a yield-optimizing service where users could deposit tokens and automatically earn rewards. However, the developers had a malicious plan at play, CertiK, a leading security firm, revealed.
The developers introduced a nefarious contract that permitted them to steal user funds from the protocol's smart contracts, leading to a staggering 99% drop in CHIBI tokens in the following hours.
The term "rug pull" has been coined to describe such scams where developers, after gaining a good rapport on social media and hyping their project to raise substantial capital, siphon off the liquidity once the project’s tokens are introduced to the public.
PeckShield, another security firm, detailed the money trail. Post-theft, the tokens were sold off for a hefty 555 Ether (ETH), around $1.041M, and relocated from Arbitrum to Ethereum.
These funds were later moved to the Tornado Cash mixing service, a favored tool among crypto wrongdoers looking to conceal their transaction activities.
In the wake of the incident, Chibi Finance’s Twitter handle and official website have been deactivated.
Adding to the controversy, some prominent voices in the Crypto Twitter community who earlier endorsed the project to their followers hastily deleted their posts about Chibi Finance, sparking further ire within the community.
This incident is a reminder to the crypto-enthusiasts about the unpredictability and risk associated with new crypto projects.
It is worth noting that in May, "rug pulls" resulted in higher losses than those from decentralized finance (DeFi) projects.
