Recent reports reveal that Magnate Finance, a DeFi lending protocol on Ethereum’s Layer-2 network, Base, has conducted a rug pull, resulting in a loss of $6.4 million worth of assets for its users. This incident is the latest in a series of troubling events on the Base network, occurring within a month of its official mainnet launch. The rug pull has once again brought attention to security concerns within the DeFi space.
Magnitude of the Rug Pull
Blockchain security intelligence provider Peckshield confirmed the rug pull by Magnate Finance, disclosing that the project’s developers manipulated the price oracle provider, enabling them to withdraw all platform assets. Peckshield’s investigation also revealed that the scammers moved $1.34 worth of DAI to a new address and bridged $1 million of the stolen assets to the Binance Smart Chain (BNB) network.
The majority of the stolen funds were transferred to other Ethereum Layer-2 solutions like Optimism and Arbitrum, while a portion of the loot, including $1.3 million worth of DAI and 295 ETH valued at approximately $486,000, remains within the Base Network.
Suspicion and Historical Context
Prior to the rug pull, an on-chain investigator, ZachXBT, raised suspicions about the potential event. He noted that the deployer address of Magnate Finance had received funds from previous rug pulls, including the Solifire and Kokomo Finance incidents, which had collectively resulted in a loss of $16.7 million of user funds.
Base Network’s Challenges
The Base Network has experienced a rocky start since its public launch on August 9. BALD, a memecoin project on the Coinbase native network, exposed as a rug pull, and developers withdrew $25.6 million of the project’s liquidity. Subsequently, the Rocketswap DEX suffered a “brute force hack,” losing over $450,000, and LeetSwap, another Base-native DEX, had 342 ETH, valued at $626,000, stolen.
Despite these setbacks, the Base Network has shown positive signs. It ranks as the fourth most active Layer-2 solution according to L2Beat data, with a daily transaction per second value of 7.73. Additionally, amid a declining DeFi ecosystem, Base’s Total Value Locked (TVL) has grown by 11.02% in the last week, reaching $185.81 million, showcasing resilience.
The Magnate Finance rug pull serves as a stark reminder of the security challenges facing the DeFi space, particularly on emerging networks like Base. While incidents like these highlight vulnerabilities, they also underscore the importance of due diligence and security measures in the cryptocurrency ecosystem. As the Base Network navigates both positive developments and challenges, the community remains vigilant about its growth trajectory.