The rise of the cryptocurrency sector has opened up several loopholes for hackers to scam millions of dollars out of the blockchain industry worldwide. Experts believe that the crypto industry will experience more hacks if it continues to draw the market’s attention heavily and onboard new users. Moreover, decentralized finance (DeFi) has been a favorite sector for hackers as there is a large amount of inflow of funds. Since the crypto market made a bullish start in 2023, it was waiting for an exploit to happen which would define its vulnerability. According to recent news, DeFi protocol Hope Finance appears rug pull as the community was scammed for $2 million, making it the largest exit scam on Arbitrum in 2023.
Hope Finance Becomes Victim Of The Largest Exit Scam In 2023
The DeFi space is no stranger to hacks and attacks, and the latest victim is Hope Finance. A hacker managed to steal approximately $2 million worth of cryptocurrency assets from the protocol, claiming ownership of the entire genesis protocol. The incident was flagged by on-chain security firm Certik Alert, who notified the DeFi community through a Twitter thread.
The specifics of the project are not easy to come by, but in January 2023, the platform’s Twitter account announced the launch of a new algorithmic stablecoin called Hope token (HOPE). The token dynamically adjusts its supply according to the price of Ether, making it an exciting addition to the DeFi space.
According to reports, the hacker responsible for the attack is Ugwoke Pascal Chukwuebuka, a Nigerian national who defrauded the community and transferred over $1.86 million to Tornado Cash shortly after the platform went live on February 20. The scammer changed the details of the smart contract, causing funds to be drained from the Hope Finance genesis protocol.
Some in the cryptocurrency community have claimed that the attack was a rug pull, a type of scam where developers abandon a project and take all the funds with them. However, AegisWeb3 monitoring revealed that the scammer sent ETH to the Ethereum blockchain via Celer and Uniswap and then used three addresses to send 1095 ETH (approximately $1.86 million) to Tornado Cash.
Despite this setback, the DeFi space continues to grow, and layer-2 protocols like Arbitrum and Optimism are playing a significant role in scaling the Ethereum ecosystem. These protocols are handling an increasing number of transactions and enabling smart contract exponential scaling, providing a promising future for the DeFi space.
Hope Finance Had Vulnerabilities In The Smart Contract
A Cognitos official audited the Hope Finance smart contract, according to a tweet dated February 13. However, after reviewing the audit summary, two major contract function vulnerabilities were identified. This included the possibility of re-entrancy attacks and an incorrect modifier. Despite flagging these vulnerabilities, Cognitos discovered that the smart contract code had successfully passed the audit. Following the scam, Hope Finance informed users about an emergency withdrawal function that allowed them to withdraw staked liquidity from the protocol.
Certik stated, “It appears that the scammer changed the TradingHelper contract which meant that when 0x4481 calls OpenTrade on the GenesisRewardPool the funds are transferred to the scammer.”
Exploits and scams have been shaking the crypto industry and weakening investors’ sentiments, and trusts as the FTX’s collapse had already made a big hole in the sector. Moreover, crypto hacks have become a major pain on the side of any digital currency investor. The effects of crypto and DeFi hacks in the cryptocurrency industry are devastating, forcing many investors to give up on digital currencies completely.
Decentralized Finance (DeFi) has been touted as the future of finance, promising to bring financial services to the unbanked and underbanked. However, the DeFi space has not been immune to attacks and hacks, resulting in substantial financial losses and a loss of trust in the ecosystem. Last year, the crypto market saw the theft of over $5 billion, making it less preferable in the world of digitization. Analysts believe this year will be more critical for the crypto space as the market is expected to expand.