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Home»TRADING NEWS»Gemholic disappears after withdrawing $3.5 million from locked ETH
TRADING NEWS

Gemholic disappears after withdrawing $3.5 million from locked ETH

By Crypto FlexsJune 8, 20242 Mins Read
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Gemholic disappears after withdrawing .5 million from locked ETH
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The cryptocurrency community is sounding the alarm over a potential $3.5 million lug pool from zkSync’s project Gemholic. On June 7, several transactions depleted the project’s smart contract funds.

Concerned members of social media platform X (formerly Twitter) have highlighted that Gemholic’s online presence has disappeared. The project’s X handle and Telegram channel have been deleted as of press time.

How did Gemholic’s rug pull come about?

Last year, Gemholic lost access to 921 ETH raised in a token sale due to a bug in its smart contract. At the time, the team promised refunds to investors once the locked funds were recovered.

On June 7, zkSync, the Ethereum layer 2 network backed by Matter Labs, completed its v24 upgrade. This update addressed a smart contract issue, allowing access to Gemholic’s locked funds. However, on-chain data shows that rather than returning funds to investors, the Gemholic team withdrew 921 ETH and transferred it to the Ethereum blockchain.

Read more: Identifying and Navigating Risks in DeFi Lending Protocols

Gemholic’s smart contracts. Source: ZKsync Explorer

Zkmarkets’ pseudonymous founder 0xMorgosh called the move a “rugpull”, accusing Gemholic of defrauding investors for a year with false refund promises. He pointed out that the Gemholic team completed know-your-customer (KYC) verification through SolidProof, which has not publicly addressed the situation.

“KYC providers must either admit their inability to conduct thorough verification or take action to report fraudsters to authorities and make public statements. “If SolidProof continues to ignore this issue, their platform will become useless and lose credibility,” he added.

0xMorgosh also said Binance allegedly funded the contract creator’s address and urged the community to share any insights on how the exchange could help.

Read more: What is ZKSync?

Meanwhile, this incident is reminiscent of a similar incident involving ZKasino, another ZK stack-based platform. ZKasino broke its promise to return users’ bridged Ethereum, sparking strong resistance from the cryptocurrency community. The project was later cleared of fraudulent activity after Dutch authorities arrested it and launched an investigation into the matter.

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