Arbitrum lender likely an exit scam

A new lending protocol on the Arbitrum network could be a scam platform, says on-chain researcher ZachXBT.

Crypto sleuth ZachXBT has named newly launched defi lender Sorta Finance as a possible exit scam and part of a criminal organization stealing funds across blockchains. According to ZachXBT, the Arbitrum-based protocol shares the same signature as past rug pulls like Magnate Finance, Solfire, and HashDAO.

The modus operandi generally involved forking Compound’s lending smart contract on Ethereum Virtual Machine compatible chains. The malicious developers would then pause the protocol and withdraw user deposits from the total value locked.

Community Warning: @Sorta_Finance There is a high probability of scams on Arbitrum in the future, so do not use the protocol.

This scammer has previously stolen more than $25 million through scams such as Magnate, Kokomo, Lendora, Solfire, Crolend, HashDAO.

The distributor has just been funded and the first address is… pic.twitter.com/JsHGawtQyX

— ZachXBT (@zachxbt) July 25, 2024

Bad actors are gaining legitimacy on EVM chains and accumulating TVL using shady auditing firms, ZachXBT said. Low-level crypto influencers are also being paid to promote the platforms, a process the crypto-local term for this is called “shilling.”

Additionally, a crypto researcher noted that a Tornado Cash withdrawal funded an early Sorta Finance user. Tornado Cash is a US-approved crypto mixer used to hide transactions. Lawmakers have often noted that criminals use the tool to hide where funds come from.

As of July 25, Sorta Finance had a TVL of less than $100,000. But ZachXBT highlighted how similar protocols seemingly designed by the same person have led to millions in deposits. Blockchain Sherlock Holmes estimated that the people behind Sorta Finance and other scams have pocketed more than $25 million to date.

Community Alert: The scammer group that 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 about $1 million laundered from previous carpets and started adding liquidity… pic.twitter.com/yqRKvZuuye

— ZachXBT (@zachxbt) April 14, 2024

ZachXBT’s post highlights a new crypto trend focused on preventing blockchain crime before it happens. Individuals and collaborative organizations are dedicating resources to improving on-chain security by bringing public vigilance to the forefront.

Companies like Coinbase and startups like SEAL 911 have created digital information sharing and analysis centers, or ISACs, to aggregate data on attacks, malicious activity, and criminal operations to better the Defi ecosystem.