DeFi saw another multimillion-dollar rug pull this past week, and the Multichain saga continues to spiral out of control.
Newsletter
Welcome to Finance Redefined, your weekly dose of essential decentralized finance (DeFi) insights — a newsletter crafted to bring you the most significant developments from the past week.
After a bullish April, May was another month of exploits, rug pulls and hacks, bringing back uncertainty to DeFi. The most prominent headline marker in the past week was the Multichain protocol. The cross-chain DeFi protocol’s delayed node upgrade created a spiral impact and tanked its token price by 30%.
The Multichain protocol saga impacted multiple DeFi protocols, forcing Binance to suspend deposits for ten bridged tokens on May 25 after days of stuck transactions.
Multichain aside, the week was dominated by hacks, exploits and rug pulls. A crypto project allegedly ran off with $32 million of customer’s funds, DeFi protocol WDZD Swap was exploited for $1.1 million, and a bug in Aave v2 on Polygon led to the freezing of some assets in the contract.
The top 100 DeFi tokens had another bearish week, with a slight change from the previous week and most DeFi tokens trading red on the weekly charts.
Multichain token plunges 30% on backend upgrade delay
On May 24, the price of cross-chain router protocol Multichain’s native MULTI token fell by 30% in 24 hours to trade at $4.97 when reported by Cointelegraph. It has since dropped under the $4 mark. The sell-off came after users reported their multichain funds had not arrived due to a backend node upgrade “taking longer than expected.”
At the same time, a wallet address linked to layer-1 blockchain developer Fantom Foundation reportedly removed 449,740 MULTI ($2.4 million) from liquidity on the decentralized exchange SushiSwap. Rumors also appear to have fueled the sell-off. In a tweet viewed over 300,000 times since publication, one user wrote, “It’s rumored that the multichain team has been arrested by the Chinese police, with 1.5 billion dollars of contract funds under control.” The same day, blockchain analytics firm Lookonchain reported at least $3 million worth of MULTI outflows linked to smart money accounts.
Binance suspends deposits for bridged tokens, seeks clarity from Multichain team
On May 25, crypto exchange Binance suspended deposits for 10 bridged tokens after days of stuck transactions that sparked uncertainty surrounding the Multichain protocol.
Affected token pairs include Polkastarter (POLS), Alpaca Finance (ALPACA), Travala.com (AVA), Spell (SPELL), Fantom (FTM), Alchemy (ACH), Beefy (BIFI), SuperVerse (SUPER), Harvest Finance (FARM) and DeXe (DEXE). The move impacts users of bridged tokens on the BNB Smart Chain, Fantom, Ethereum and Avalanche blockchain networks.
Project takes off with $31.6 million in alleged exit scam
A crypto project called Fintoch — which claimed to be backed by investment banking firm Morgan Stanley — appears to have taken off with almost $32 million of users’ funds, according to on-chain detective ZachXBT.
In a thread, the crypto sleuth showed a diagram detailing the movement of funds. The on-chain detective alleged that the project had likely conducted an exit scam. The fund promised a 1% daily interest for investments from users. However, users of the platform have started to report that they are now unable to withdraw their funds from Fintoch.
DeFi protocol WDZD Swap exploited for $1.1 million: CertiK
On May 19, DeFi protocol WDZD Swap was exploited for $1.1 million worth of Binance-Peg Ethereum Token, according to a May 21 report from blockchain security firm CertiK. Binance-Peg Ethereum Token represents Ether (ETH) bridged to the BNB Smart Chain.
According to the report, an attacker conducted nine malicious transactions that drained 609 Binance-Peg Ethereum Tokens — worth $1.1 million at the time of the attack — from a contract associated with the WDZD project.
Bug in Aave v2 on Polygon causes some assets to become stuck in contracts
A bug in an older version of crypto lending protocol Aave is blocking users from interacting with Wrapped Ether (WETH), Tether (USDT), Wrapped Bitcoin (WBTC) or Wrapped Matic (WMATIC) pools on Aave v2 on Polygon, preventing assets from being withdrawn from them, according to a May 19 proposal that attempts to fix the bug through a patch. The proposal says that users are currently unable to “supply more of those assets, borrow, repay, or withdraw.“
Although withdrawals are currently impossible, the team stated that funds are “perfectly safe,” as the bug can be fixed after a governance vote.
DeFi market overview
DeFi’s total market value saw a minor increase this past week. Data from Cointelegraph Markets Pro and TradingView shows that DeFi’s top 100 tokens by market capitalization had another bearish week, with most tokens trading in the red. The total value locked in DeFi protocols remained below the $50 billion mark.
Thanks for reading our summary of this week’s most impactful DeFi developments. Join us next Friday for more stories, insights and education regarding this dynamically advancing space.
