The new lending protocol on Arbitrum’s network may be a scam platform, according to on-chain investigator ZachXBT. The crypto sleuth has reportedly called out the newly launched DeFi lender, Sorta Finance, as a possible exit scam, alleging it is part of a criminal group stealing funds across blockchains. According to ZachXBT, the Arbitrum-based protocol bears the same signature as past rug pulls like Magnate Finance, Solfire, and HashDAO.
Allegations Against Sorta Finance
ZachXBT claims that Sorta Finance, like previous scams, operates by forking Compound’s lending smart contract on Ethereum Virtual Machine-compatible chains. Malicious developers then pause the protocol and withdraw user deposits from the total value locked (TVL). ZachXBT issued a community alert stating, “Community Alert: @Sorta_Finance is likely to exit scam on Arbitrum in the future so do not use the protocol.”
Previous Scams and Modus Operandi
According to the news sources, the investigator detailed that this scammer has previously stolen over $25 million with scams such as Magnate, Kokomo, Lendora, Solfire, Crolend, and HashDAO. He noted, “This scammer has previously stolen $25M+ with scams such as Magnate, Kokomo, Lendora, Solfire, Crolend, HashDAO, etc.” These bad actors gained legitimacy on EVM chains and accrued TVL by tapping shady audit firms and paying low-tier crypto influencers to promote the platforms, a process known as “shilling.”
Furthermore, ZachXBT pointed out that a Tornado Cash withdrawal funded an early Sorta Finance user. Tornado Cash is a U.S.-sanctioned crypto mixer used to obfuscate transactions. Lawmakers have frequently noted that criminals use the tool to hide the origin of funds. This connection raised additional red flags about Sorta Finance.
As of July 25, Sorta Finance had less than $100,000 in TVL. Despite this relatively low amount, ZachXBT emphasized that similar protocols, seemingly masterminded by the same person, led to millions of deposits. He surmised that individuals behind Sorta Finance and other scams have pocketed over $25 million to date.
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Continued Vigilance and Public Alerts
In another community alert, ZachXBT stated, “Community Alert: The group of scammers who stole 8 figs with Magnate, Kokomo, Lendora, Solfire, etc. is back with a new project on Blast @Leaperfinance. Last week they funded an address on Blast with ~$1M of laundered funds from the previous rugs and have begun adding liquidity.”
ZachXBT’s investigations emphasize an emerging trend in the crypto community that focuses on preventing blockchain crime before it happens. Individuals and collaborative entities are dedicating resources to improve on-chain safety by promoting public vigilance. Companies like Coinbase and initiatives like SEAL 911 have reportedly formed digital information sharing and analysis centres (ISAC) to pool data on hacks, malicious activity, and criminal operations to better the DeFi ecosystem.
Collaborative Efforts to Enhance On-Chain Safety
The collaborative efforts of companies and initiatives aim to bootstrap public vigilance and enhance on-chain safety. By pooling data on hacks, malicious activities, and criminal operations, they strive to create a more secure DeFi environment. Sorta Finance’s case underscores the importance of such vigilance and the need for continuous monitoring of new protocols on blockchain networks.
Takeaway
Sorta Finance, a new lending protocol on Arbitrum’s network, has been flagged as a potential scam by on-chain investigator ZachXBT. Allegations against Sorta Finance reportedly include similarities to past rug pulls, suspicious funding activities, and connections to Tornado Cash. As the crypto community continues to develop strategies to prevent blockchain crime, public vigilance and collaborative efforts remain crucial in identifying and mitigating potential scams like Sorta Finance. The actions taken by ZachXBT and other investigators highlight the importance of staying alert and informed about new developments in the DeFi space. Stay connected to the crypto updates with The BIT Journal to learn how events unfold.
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