Six hours after it began operating, the decentralized non-fungible token (NFT) exchange SudoRare went offline, and tokens worth more than $800,000 were withdrawn from the platform’s wallet address.
According to PeckShield, the funds have been moved to three other wallets. PeckShield determined that a Kraken user was the owner of one of the wallets in question.
SudoRare rugs over $800k despite scam calls
SudoRare is an AMM protocol that allows swaps between ERC-721 and ERC-20 tokens. It claims to combine the features of both LooksRare and SudoSwap.
LooksRare (LOOKS) is a decentralized NFT marketplace that compensates users for their engagement on the network, while Sudorare is a fork of the popular NFT exchange SudoSwap, which is recognized for its liquidity pools and lower gas prices. Both projects are prominent in crypto circles.
On the other hand, the blockchain data from Tuesday morning indicates Sudorare developers illegally emptied the LOOKS liquidity pool barely six hours after it went online, swapping nearly a million LOOKS for 154 ether and 60,000 USDC in a single transaction, therefore completing a so-called “rug pull.” More than 514 ether, or more than $815,000 at today’s exchange rates, were stolen by the developers.
Rug pulls are a kind of fraud in the decentralized finance (DeFi) industry in which developers do legitimate work on a blockchain but then “pull the rug out from under” investors by removing the project’s liquidity pools and causing an abrupt fall in the value of linked tokens.
The rug pull occurred despite several Crypto Twitter users previously warning against investing in the Sudorare project in the past week, flagging its tokenomics, the presence of fake online followers, and high yields offered to retail users.
What are Automated Market Makers (AMM)?
By using liquidity pools instead of a traditional market with buyers and sellers, automated market makers (AMMs) make it possible for digital assets to be traded automatically without permission. On a typical exchange, buyers and sellers establish separate prices. Contrarily, AMMs use a unique strategy while trading assets.
Although Automated Market Makers use new technology, they have already proved to be a vital financial tool within the dynamic DeFi ecosystem and an indication of the industry’s progress toward maturity.