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$6.4 Million Lost In Latest Base-Native DeFi Protocol Rug Pull

Magnate Finance, a DeFi lending protocol on the Ethereum layer-2 network Base, is reported to have conducted a rug pull, robbing its users of $6.4 million worth of assets. This event represents the latest troubling incident on the Base network in merely a month of its official mainnet launch.

3 Rug Pulls, $16.7 Million Lost – Who’s Responsible? 

On Friday, August 25, blockchain security intelligence Peckshield confirmed Magnate Finance’s rug pull, stating that the project developers manipulated the provider of the price oracle, allowing them to withdraw all assets of the platform.

Peckshield also provided more information on the scammers’ movement, stating that they had transferred $1.34 worth of DAI to a new address while also bridging $1 million of the loot to the BNB chain. 

The majority of the stolen funds have been transferred to other Ethereum layer 2 solutions such as Optimism and Arbitrum. Meanwhile, the $1.3 million DAI and an additional 295 ETH, valued at around $486,000, remain on the Base Network. 

Interestingly, a few hours before the Magnate Finance rug pull occurred, an X user and on-chain investigator, ZachXBT, posted a community alert stating the possibility of such an event. 

ZachXBT’s suspicion was based on the fact that the deployer address of Magnate Finance received some funds from the Solifire’s $4.8 million rug pull that occurred in January 2022. 

In addition, the deployer address of Magnate Finance is also linked to the Kokomo Finance $5.5 million exit scam in March 2023. In total, the developers of the Base DeFi lending protocol have been involved in three rug pulls that have resulted in the loss of $16.7 million of user funds.

At the time of writing, Magnate Finance has deleted its Telegram group, as well as disabled its official website. In addition, the project’s X account has also been deactivated, wiping all of its online and social media presence in what has been a “classic rug pull.”

Another Setback For Base?

The early days of the Base Network in the crypto space have been anything but smooth sailing. Prior to the network’s public launch on August 9, BALD, a memecoin project on the Coinbase native network, was exposed as a rug pull after developers withdrew $25.6 million of the project’s liquidity. 

Since then, there have been more negative occurrences within the Base ecosystem, with the Rocketswap DEX losing over $450,000 via “brute force hack,” while 342 ETH, valued at $626,000, has also been stolen from LeetSwap, another Base-native DEX.

However, it is worth stating that the Base Network has also recorded some positives in its short time of operation. According to data from L2Beat data, Base ranks as the fourth most active layer two solution with a daily transaction per second value of 7.73.

In addition, where the general total DeFi ecosystem has taken a dive below the $40 billion mark, Base has shown much resilience. Using data from DefiiLama, the project’s TVL gained by 11.02%  in the last week and is now valued at $185.81 million. 

Base

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BALD Deployer Moves Proceeds Of The Rug From Base To Ethereum

In a shocking turn of events, the developer behind the controversial meme coin BALD initiated a series of significant transactions, raising eyebrows within the cryptocurrency community. The events surrounding the deployer’s recent actions have left both the coin’s value and its reputation teetering on the edge.

BALD Deployers Send Funds To Kraken Exchange

Blockchain analysis platform Lookonchain has revealed that the deployer of the BALD token has executed audacious moves, bridging a staggering 7,000 ETH ($12.9 million) out of the Coinbase Layer 2 network, Base.

Of the 7,000 ETH that has been sent to the Ethereum network, the deployer sent 2,100 ETH ($3.87 million) in two different transactions to the Kraken crypto exchange, for purposes that can only be for selling.

Following this, the BALD deployer currently holds 4,902 ETH in their balance on the Ethereum blockchain, worth over $9 million at current prices. The wallet’s tokens holdings also remain significant, sitting at $1.115 million at the time of this writing.

The recent transactions have now dredged up speculations about who the BALD deployer might be. On-chain investigator ZachXBT previously lent his expertise to the investigations, with findings pointing toward an X (formerly Twitter) user who goes by the username @milkyway16eth due to a previous transaction between the deployer wallet and Milkyway’s wallet. However, there is yet to be any concrete proof if Milkyway is actually the brains behind the rug.

A Rollercoaster For Investors

The BALD meme coin started making the rounds on X (formerly Twitter) shortly after being launched on Base. The coin which was named after Coinbase’s CEO Brian Armstrong’s bald head rose rapidly, climbing more than 289,000% in less than two days.

This growth rate served as an attraction for investors, who bridged quickly to the ETH blockchain to invest in the token. It continued to rise, crossing a $70 million market amid the euphoria. However, this would end up being short-lived.

On August 1, the BALD deployer pulled liquidity from the token, making off with 10,705 ETH ($20 million at the time). The coin’s price declined rapidly after this, although the official X account for BALD continued to deny that it was a rug pull.

Although BALD continues to trade on the Base network, it has been unable to reclaim its past glory. Its price is down over 90% from its all-time high and recorded 18% losses in the last 24 hours alone, according to data from Coinmarketcap. Its daily trading volume is sitting at $503,000 and its market cap is $9.03 million.

Crypto total market cap chart from Tradingview.com (BALD on Base)

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Base TVL Surges 900% In 2 Weeks, What’s Driving The Growth?

Base, the Ethereum Layer 2 rollup developed by crypto exchange Coinbase, is already making a name for itself in the market. The blockchain’s Total Value Locked (TVL) has been on a rapid rise over the last few weeks, rising triple-digits in just the last two weeks alone. So the question now is, what’s driving the TVL growth?

Meme Coins, Rugs, And Newcomers

Unlike other Layer 2 networks, Base seemed to have gotten its big break with the growing trend of meme coins being launched on the network. The most notable of these was the BALD meme coin which went from less than $100,000 in market cap to over $50 million in a matter of days. As the popularity of BALD ramped up, so did the popularity of Base and decentralized finance (DeFi) traders clamored to bridge to the blockchain.

The rug deployer rugged the project not long after, making off with over $9 million in liquidity. Following this, there were speculations of former FTX CEO and founder Sam Bankman-Fried Nverbeing the mastermind behind BALD, although nothing came from these accusations.

However, instead of the blockchain’s first big project rugging being a deterrent, it seems to have had the opposite effect. More developers have moved to launch their projects on the blockchain seeing the potential. This includes the likes of SushiSwap, Uniswap, and Compound, among others, which have all provided support for the Base network.

New projects such as Alien Base, SwapBased, and Krav have also been gaining ground with their TVL growing rapidly during this time as well. So for Base, it has been able to turn a negative situation into a positive one.

Base Joining The Layer 2 Blockchain Race

In the last two weeks, the Base TVL has grown from $13 million to more than $130 million, data from DefiLlama shows. This represents an almost 900% increase in TVL during this time, making it the fastest-growing Ethereum Layer 2 blockchain in terms of TVL.

Base’s rapid growth has already put it in the race with other Layer 2s. However, when put in comparison against other established Layer 2 networks, Base still has a long way to go. It is currently the 5th-largest Layer 2 in terms of TVL, lagging well behind the likes of Arbitrum, Polygon, and Avalanche.

Nevertheless, Base’s bull case continues to grow with over $203 million already bridged to the blockchain and daily active users sitting above 100,000 over the last four days. Given Coinbase’s backing and Base’s growing popularity, it may not be long until it becomes one of the most prominent Layer 2 blockchains in the space.

DeFi/Ethereum market cap ration chart from Tradingview.com (Base)

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All Hype? BALD Meme Coin’s Volume Shaved By 96%

A sequence of unfortunate developments has struck BALD meme coin enthusiasts, as the once-shining (no pun intended) digital asset has experienced a jaw-dropping 96% decline in trading volume. 

The root cause of this worrying situation stems from the withdrawal of more than 6,000 Ether in liquidity from the meme coin’s smart contracts, an action that has cast a foreboding cloud over the asset’s prospects.

Removing such a substantial amount of liquidity had an immediate and profound impact, triggering an abrupt and steep decline in BALD’s price.

Currently, the price of BALD stands at $0.01101692, according to CoinGecko data. Within the past 24 hours, BALD has experienced a significant price decline of 57.31%.

Explosive Rise And Suspicion Surrounding BALD Coin

BALD coin underwent an unprecedented surge in value within a single day immediately after its launch. However, this meteoric rise was soon followed by a sequence of perplexing actions that cast a shadow of doubt over the project’s legitimacy.

The vigilant eyes of the Onchain Intrigue Telegram Channel turned towards BALD’s wallet activities (see image below) after a sudden withdrawal of liquidity. This subsequent investigation brought to light a set of alarming indications commonly associated with a phenomenon known as a “rug pull.”

In the intricate world of cryptocurrencies, a rug pull constitutes a type of scam in which the creators or promoters of a token vanish after attracting investment, leaving participants high and dry with their funds pilfered.

Rug pulls have earned a notorious reputation in cryptocurrency, particularly in decentralized finance (DeFi). These incidents transpire when developers execute an elaborate ruse, projecting an image of authenticity around their project, only to swiftly abscond after removing the liquidity, leaving investors in the lurch.

Darkening Clouds Of Skepticism

Compounding the unease, recent speculation has arisen linking BALD coin to Alameda, a prominent quantitative cryptocurrency trading firm. While these connections are yet to be substantiated, the mere existence of such ties threatens to deepen the ongoing crisis surrounding BALD.

This potential association also raises pertinent questions about the community’s trust in analogous projects, further amplifying the sense of uncertainty that shrouds the cryptocurrency landscape.

Related Reading: Binance Coin (BNB) Price Gears Up For A 10% Upswing – Here’s How

Meanwhile, after the troubles that hit BALD, there’s a new start in sight. A new BALD token has been introduced; this time, it’s designed with locked liquidity. This move is meant to bring back hope and trust to the project.

It shows that the people behind BALD are determined to make things right and regain the confidence of those who believed in them.

(This site’s content should not be construed as investment advice. Investing involves risk. When you invest, your capital is subject to risk).

Featured image from Yahoo Finance 

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29 Other Meme Coins Besides BALD Rugged on Base

Scope data on July 31 shows that 29 meme coins were launched over the weekend on Base to capitalize on the recent frenzy surrounding BaldBaseBald (BALD), a meme coin inspired by Coinbase CEO Brian Armstrong.

However, all 29 meme coins have since been rugged, with the deployer exiting with over $1 million after seeding roughly $105,000 of ETH as liquidity. Base is an Ethereum layer-2 platform based on Optimism roll-up technology. 

Rug Pulls On Base

On July 29 and 30, there was excitement about the meme coin, BALD, as its prices exploded by as much as 4,000X, pushing the token’s market cap to over $100 million. This was great news for those who invested early as some exited as the wave rise, profiting.

Some builders took advantage of the hype and created meme coins to deceive investors eager to join the BALD trend, eventually resulting in losses for some meme coin token holders.

While BALD has already been rug-pulled, Scope notes that the address behind the 29 meme coins also has a history of rug-pulling in other platforms, including the BNB Chain and Arbitrum, a popular Ethereum layer-2 platform. In platforms where meme coins are traded, liquidity, provided by the community, is essential due to the decentralized nature of trading. 

Rug pullers typically supply liquidity to their meme coins, which attracts more users to buy the coin and increases liquidity as prices rise. However, the creator then deliberately withdraws liquidity at this point, converting their meme coins to a more liquid coin like Ethereum, causing their token prices to drop to zero.

As of July 31, hours after the rug pull, the address primarily held USDC and a small portion of ETH in their portfolio, with no meme coins. This potentially highlights the rug puller’s risk-averseness and his concerns about the risks involved in this asset class.

Related Reading: Bitcoin Crucial Moment: Will Resistance At $29,500 Trigger A Sell-Off Or Surge?

Meme Coins Are Volatile

Meme coins are popular in crypto, especially Ethereum, where they are minted as fungible ERC-20 tokens in their trillions. Dogecoin, endorsed by Elon Musk, is the most liquid and widely recognized.

Despite rising popularity, there are concerns about their volatility and lack of utility, with some critics labeling them as “casinos” that undermine the true vision of crypto as an alternative financial system.

Dogecoin price on July 31 as 29 meme coins rugged on Base| Source: DOGEUSDT on Binance, TradingView

For example, the collapse of BALD, which commanded billions in market cap on Base over the weekend, has drawn widespread condemnation. Besides BALD, other like PEPE and LADYS are struggling, dropping by over 70% from their all-time peaks registered in H1 2023.

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BALD Coin Rug Pull: How A $100 Million Memecoin Became Worthless Overnight

On July 30, a meme coin called BaldBaseBald (BALD) launched on Base Network, Coinbase’s new Layer 2 built on Optimism. The coin referenced Brian Armstrong, Coinbase’s “bald” founder, and quickly became a coordination point for speculators on the frontier chain. 

Within two days, the token had reached a market cap of $100 million, with over $25 million in liquidity. However, the token’s meteoric rise turned out to be a classic case of market manipulation, as the deployer behind the token, BaldBaseBald, rug pulled the token and caused its price to plummet by 85%.

Malicious Market Behavior Behind BALD?

Market researcher Thiccy indexed all the transactions from the Bald deployer and uncovered a story of malicious market behavior. BaldBaseBald added over 6,700 ETH, or over $12.5 million worth of liquidity, to the pool in the first 24 hours, a surprising amount of capital for a meme coin on a new chain. 

The deployer’s actions were undoubtedly bullish for speculators, and many people speculated that Brian Armstrong had created the coin to drum up hype. However, as soon as the deployer stopped adding liquidity to the pool, the price stagnated and broke down. 

BALD

24 hours later, the deployer started bidding on BALD again, causing the price to double. Then, the deployer withdrew over 10.500 Ethereum (ETH), or almost $20 million worth of liquidity, leading to an 85% drop in the token’s value.

Thiccy’s analysis showed that the deployer had made a net profit of 2,789 ETH, or 5.2 million dollars, after adding 6,870 ETH, spending 1,360 ETH buying at an average price of 0.0004, and withdrawing 10,704 ETH. 

It was surprising how well-capitalized the actor was and how bold they were in carrying out this apparent manipulative market behavior in the middle of the public light on Coinbase’s compliance chain. Thiccy Concluded:

And with that, the story of BALD has come to a close play stupid games, win stupid prizes. Hopefully we can learn from this as a space this market is rife with market manipulation and unethical shills. Be careful who you trust.

Thiccy advises investors to control their Fear of Missing Out (FOMO) and not risk more than they can afford to lose, as survival is too important in this game. 

As for BaldBaseBald has removed the rest of the liquidity, bringing their total Profit and Loss (PnL) to 3,163 ETH, or $5.9 million. 

BALD

Featured image from iStock, chart from TradingView.com