Magnate Finance executes $6.4 million exit scam on Base Network: Details

Magnate Finance, a lending project operating on the Ethereum Layer 2 network Base, has executed an exit scam, making off with an estimated $6.4 million. The event, described as a rug pull by security firm PeckShield, has sent shockwaves through the cryptocurrency community.

🚨🚨🚨The @MagnateFi just performed a rugpull (w/ ~$6.5m loss) by directly manipulating the price oracle.

Here is the related hack tx: https://t.co/vjFFSNY27W https://t.co/APJjRZAsCK pic.twitter.com/CHhxGqul83

— PeckShield Inc. (@peckshield) August 25, 2023

Magnate Finance exit scam linked to previous fraudulent activities

The exit scam was carried out by manually modifying the price oracle used by the lending protocol, enabling Magnate Finance to drain all user deposits. The team behind Magnate Finance has since cleared out all of its digital presence, including social media accounts and the official website.

On-chain analyst ZachXBT had earlier warned about the possibility of an exit scam by Magnate Finance. The analyst discovered that Magnate Finance’s deployer address was directly linked to a previous exit scam involving a project called Solfire, where $4.8 million was defrauded. Detailed findings from CertiK also suggest that deceptive strategies were at play, with the deployer account altering the price oracle provider, enabling the extraction of $5.3 million in liquidity through counterfeit collateral.

This incident marks the second rug pull seen this month on Base, following SwirlLend’s disappearance with $460,000 earlier in August. The connection to previous fraudulent activities and the sudden disappearance of Magnate Finance’s digital presence have intensified suspicions and concerns within the crypto community.

BaseScan revealed substantial assets missing from Magnate Finance, including $2 million in USDbC, $1.56 million in ETH, $1.3 million in DAI, and $408,000 in WETH. The Total Value Locked (TVL) of Magnate Finance plummeted from $6.4 million to about $107,000 as a result of the scam.

The Magnate Finance website went dark, and its Telegram group vanished, leaving a cryptic response to ZachXBT’s initial post, stating, “We stick to the plan? 50-50?” and updating their bio with “Contract breached by Zach.” This enigmatic remark has left the cryptocurrency community speculating about the true intentions behind the rug pull.

In conclusion, the Magnate Finance exit scam has resulted in a staggering loss of approximately $6.5 million and has further eroded the credibility of projects on the Base network. The direct manipulation of the price oracle and the connections to previous exit scams highlight the vulnerabilities and risks within the crypto space.