Rugged! Investors Lose $112k to Arbitrum DEX ArbiSwap

ArbiSwap, a decentralized exchange built on Arbitrum, has become the latest bad actor in the market after rugging its investors for 68.47 ETH (worth $112,880).

How Did It Happen?

Launched on February 24, 2023, ArbiSwap claimed to offer holders of its ARBI tokens a 100% yield from trading activities. On the launch date, the project’s cryptocurrency, ARBI, debuted with a trading price of $2.66. It also had a daily trading volume of $2.07 million. 

ArbiSwap’s rapid growth came when its underlying blockchain Arbitrum was booming. In late February, Arbitrum superseded the BNB Chain in daily trading volume with $373 million at the time.

In the early hours of March 2nd, the project’s developer team minted one trillion ARBI tokens. These tokens were then swapped for USDC stablecoin through its liquidity pool, ARBI/USDC. A bot deployed by the developers converted the USDC holdings into ETH, netting a profit of 68.47 ETH from the hard rug pull.

This move triggered a sharp decrease in the price of ARBI in only a few hours. ARBI lost over 99.9% of its value, pulling its price to only a fraction of one cent. At press time, the token traded at $0.0000000151.

Unsurprisingly, the project’s total value locked (TVL) has declined too. Just before the rug pull, its TVL sat at $4.4 million. After the exploit, ArbiSwap’s TVL was $269,000, as revealed by the aggregator platform DeFiLlama.

Rug Pull – A Tool for Bad Players

Over the years, rug pulls have become a tool for players aiming to exploit unsuspecting investors and rid them of their hard-earned money.

A rug pull occurs when developers of a crypto project withdraw users’ funds from its liquidity pool through a backdoor exit, abandoning the project and leaving the token’s price to crash. Such malicious projects grow their user base by promoting the project through social media platforms like Twitter, Facebook, and Telegram.

Rug pulls are also prevalent with non-fungible tokens (NFTs). In February 2022, ex-adult film star Lana Rhoadeshyped an NFT collection called CryptoSis through several social platforms for about a year. The project eventually rugged investors for $1.5 million worth of assets.