One of the latest trends in the DeFi ecosystem is developers dumping their token and running off with the proceeds generated. A number of projects under the DeFi project have been rug pulled.
For some time, the DeFi ecosystem has been plagued by a variety of well-known scams and frauds, with some other emerging in the form of a “soft rug.”
The term “rug pull” will be known to those who have dabbled in DeFi for some time. This usually refers to insiders or developers quitting a project by removing liquidity from pools or vaults on decentralized exchanges and disappearing with the cash.
The “soft rug,” where a project’s founder merely dump their own tokens and depart the enterprise instead of taking control of customers’ money, is a related wrongdoing plaguing the developing financial world.
In certain circumstances, a soft rug is more deceptive, with developers taking to great lengths to instill trust and a false sense of security while attempting to conceal token dumping.
Users may not even realize they’ve gotten the short end of the stick if it’s done well enough.
Over the last week, there have been a few of such occurrences in the DeFi scene where soft rug exit scams have been reported.
Polywhale, a Polygon-based yield farming project, revealed in a Reddit post on June 20 that it would be shutting down operation on the platform. Token holders noticed that the project’s treasury wallet had been emptied two days later.
Polywhale Finance’s founders were accused of pulling a fast one by selling their tokens during the recent crypto market price dip, according to Cointelegraph. KRILL, the project’s native token, has dropped to $0.17 from a high of $7 earlier this month.
Swipe, which developed Binance Smart Chain’s third-largest protocol, Venus, was the topic of another alleged soft rug, according to The Defiant.
The founders of the BSC-based money market and stablecoin protocol announced their departure from the project on June 22. On Tuesday, Uniswap forum member @MonetSupply accused the team of being soft.
looks like flagship @binance project @VenusProtocol’s core team (@Swipe) pulled a soft rug
for lending protocols, sound governance isn’t everything, it’s the only thing https://t.co/MDVMrw7I4y
— monetsupply.eth (@MonetSupply) June 22, 2021
Members of the new Venus community, on the other side, refuted the charges, claiming that it was simply a rumor and that the Swipe team had already turned in all of their tokens.
The incident hasn’t stopped the Venus native XVS token from falling 40% since the same time last week, when it was trading near $34. XVS is down 87 percent from its all-time high of $147 on May 10, according to CoinGecko, and is currently trading for $19.28.
