Ethereum L2s Targeted by Ruggers: How to Spot Rugpulls

Serial ruggers target Arbitrum, Base, and Blast users in potentially wide-reaching scheme.

Two hackers sitting on a sofa hacking on their laptops in a rug shop.
Created by Kornelija Poderskytė from DailyCoin
  • Serial ruggers have launched projects targeting users across multiple Ethereum Layer 2 blockchains.
  • ZachXBT has called attention to these projects, warning users of the potential risks.
  • Find out how to spot and avoid these types of scams.

In the world of finance, bad actors are always on the prowl, looking to rob people of their hard-earned assets. The crypto industry is no different.

Among the cons that have become prevalent in the crypto space are rugpulls. In these scams, developers create and promote a new cryptocurrency project to garner interest, only to suddenly disappear with investor funds or dump the token on holders.

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Recently, prominent crypto sleuth “ZachXBT” has warned that scammers have launched several fraudulent projects across multiple Ethereum Layer 2 chains.

In this article, we explain how everyday crypto users can spot and avoid these types of scams.

Ethereum Layer 2 Chain Users at Risk?

In a Sunday, April 14 thread on X, ZachXBT warned of at least three potential rugpull projects on Arbitrum, Base, and Blast. The highlighted projects are Glori Finance, ZebraDAO, and Leaper Finance, respectively.

According to the on-chain investigator, these projects, with a combined TVL of around $1.5 million, appear to have been created by the same group of scammers who fleeced tens of millions of dollars from other fraudulent projects like Magnate Finance, Kokomo, Lendora, and Solfire.

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ZachXBT explained that these scammers have recently moved millions to add liquidity to the new projects on Arbitrum, Base, and Blast to inspire confidence in unsuspecting investors.

While years of experience can give crypto sleuths like ZachXBT an edge in identifying these types of scams, there are steps everyday users can take to spot and avoid them.

How to Spot and Avoid Potential Rugpulls

While crypto rugpulls are becoming increasingly sophisticated, with some even claiming to be audited at the start, there are still characteristics that can be used to spot and avoid them. Here are some useful tips:

  • Be wary of projects with no whitepaper, a seemingly copy-paste whitepaper, or a short whitepaper stuffed with buzzwords.
  • As much as possible, avoid projects with locked liquidity where typically anonymous developers can access it.
  • Be wary of projects claiming to be audited by low-tier and scarcely known auditing firms.
  • Consult tools like Token Sniffer and Rug Doctor to search for code vulnerabilities and red flags.

On the Flipside 

  • Glori Finance, ZebraDAO, and Leaper Finance have all deactivated their X accounts following ZachXBT’s report.
  • According to DefiLlama data at the time of writing, the TVLs of Glori Finance, ZebraDAO, and Leaper Finance sit at $1.3 million, $309,574, and $144,097, respectively. The TVLs have remained largely unchanged since ZachXBT’s report, suggesting developers have yet to rug them. This may be due to insufficient investments from the general public.

Why This Matters

In the fast-paced world of cryptocurrencies, it is easy for scams like rugpulls that have cost investors millions of dollars to thrive, making it necessary for investors to learn how to identify potential scams.

Read this for more on crypto scams:
$2 Billion Lost to Crypto Scams and Cyberattacks in 2023

Follow the discussion around inclusions to Ethereum’s next major upgrade:
Ethereum’s Next Upgrade Will Boost Wallet UX, but at What Cost?

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

Author
Okoya David

David Okoya is a crypto news reporter at DailyCoin based in Nigeria. He covers various topics related to the cryptocurrency industry, including exchanges, regulations, and price movements, and strives to bring fresh angles to breaking news. With experience as a freelance crypto news writer, David upholds the highest journalistic standards, telling complete stories and answering lingering questions whenever possible.