Crypto scams have a direct effect on the crypto community and impact both the crypto market and individual investors. While the cryptocurrency market witnessed a sharp recovery this month in the backdrop of centralised banks collapsing in the US, a new scam appears to have come to light. In what is being suspected as a “rug pull” scam, DeFi platform Kokomo Finance has mysteriously disappeared from all social networking platforms, stirring fear and concern among the crypto community, including investors that linked their funds to the platform. A total of $4 million (roughly Rs. 35) crore could be in jeopardy if this is proven to be an exit scam.
Kokomo Finance described itself as an open source and non-custodial lending protocol in its now-defunct website. Blockchain research platform CertiK, alerted the crypto community about the potential rug pull scam over the weekend after it observed that Kokomo’s native KOKO token plunged by 95 percent overnight. Soon after, the Twitter, Discord, and Telegram accounts of the DeFi platform also vanished. The platform was built on the Optimism Layer-2 blockchain built by Ethereum developers. As per CertiK, this is the largest such incident on the Optimism blockchain.
It is suspected that the deployer of KOKO tweaked and reset the reward speed for investors who had staked their tokens in the lending protocol. The borrow function on the platform was also paused suddenly, a CoinTelegraph report said.
A deeper dive into Kokomo’s smart contract audit showed that the owner of the KOKO token had a one-time allowance to mint 45 percent of the maximum supply to a random address. Kokomo allowed users to borrow cryptocurrencies and stablecoins with no credit check.
As of Monday, March 27, its governance token KOKO was down by 98.30 percent to trade at $0.00065878820 (roughly Rs. 0.054), as per FX Empire.
In the crypto sector, a “rug pull” is a type of scam where a project or a cryptocurrency is launched and once the scammers rope in enough capital from the project, they abandon the project and abscond with the loot.
Crypto scams rose by 81 percent in 2021 with rug pull scams making for the most common category. Rug pulls costed the crypto community over $2.8 billion (roughly Rs. 21,333 crore) in 2021, Chainalysis had said in a report at the time.
Over the course of 2022, over 117,620 scam tokens were launched into the global crypto market that managed to dupe several people off their hard-earned funds, Solidus Labs, a crypto trade research organisation said in its “Rug Pull Report”.