Understanding the Recent Rug Pull of Kokomo Finance (KOKO) on Optimism

On March 27, it was reported that according to the monitoring of Beosin EagleEye security risk monitoring, early warning and blocking platform under the blockchain security audit company Beosin, Kokomo Finance (KOKO) on Optimism had a rug pull. The deployer of Kokomo Finance (KOKO) first deployed a contract cBTC (0x1e02e6a5b549eead726ebcce64a54215196760e2), and then called_ SetRewardSpeed and suspend borrowing. Next, the attacker changed the contract implementation of the cBTC to a malicious contract (0x05b2957591a4d1334b230f8c56fd62ddee17b52e), calling the 0x804edaad method of the cBTC contract to transfer 7010 soWBTCs from to 0x5c8db6eea11896065ec7dcfc67f458c54ccf7bff. The attacker eventually replaced 7010 soWBTCs with 141 WBTCs. Eventually, the attacker replaced 7010 soWBTCs with 141 WBTCs.

The loan agreement on Optimism Kokomo Finance has a Rug pull

Recently, on March 27, it was revealed that Kokomo Finance (KOKO) on Optimism had been subjected to a rug pull, causing widespread concern among crypto investors. According to the monitoring of Beosin EagleEye security risk monitoring, early warning, and blocking platform under the blockchain security audit company Beosin, the deployer of Kokomo Finance (KOKO) first deployed a contract cBTC (0x1e02e6a5b549eead726ebcce64a54215196760e2), and then called_ SetRewardSpeed, suspending borrowing. Next, the attacker changed the contract implementation of the cBTC to a malicious contract (0x05b2957591a4d1334b230f8c56fd62ddee17b52e), calling the 0x804edaad method of the cBTC contract to transfer 7010 soWBTCs from to 0x5c8db6eea11896065ec7dcfc67f458c54ccf7bff. The attacker eventually replaced 7010 soWBTCs with 141 WBTCs. This article will delve deeper into the technicalities of this rug pull and what investors can do to protect themselves.

What is a Rug Pull?

Before we analyze the specifics of the Kokomo Finance rug pull, let’s first understand what a rug pull is. A rug pull is a scam that involves a sudden and deliberate act to remove all liquidity from a project, causing the token’s value to plummet, and leaving investors with near-worthless assets. Rug pulls have become prevalent in the crypto industry, especially in the DeFi segment.

The Mechanics of Kokomo Finance’s Rug Pull

Kokomo Finance is a yield aggregator that operates on the Optimism Layer 2 scaling solution. The project aimed to automate the process of earning yield by aggregating rewards from various protocols. However, on March 27, the attacker exploited a vulnerability in the platform and removed all liquidity, leaving investors with near-worthless assets.
To understand how the attacker accomplished this, we first need to analyze the steps involved in the rug pull. The attacker first started by deploying a contract cBTC (0x1e02e6a5b549eead726ebcce64a54215196760e2), which was a legitimate contract meant to facilitate lending and borrowing. The contract had already been audited by several security audit firms, including ConsenSys.
However, the attacker then called_ SetRewardSpeed, suspending borrowing, and changing the contract implementation of the cBTC to a malicious contract (0x05b2957591a4d1334b230f8c56fd62ddee17b52e). The attacker then called the 0x804edaad method of the cBTC contract to transfer 7010 soWBTCs to 0x5c8db6eea11896065ec7dcfc67f458c54ccf7bff.
The attacker then exploited a vulnerability in the contract to replace 7010 soWBTCs with 141 WBTCs, which allowed the attacker to profit from the rug pull. The attacker then removed all liquidity from the platform, causing the token’s value to plummet.

Lessons Learned

The Kokomo Finance rug pull emphasizes the importance of performing proper due diligence before investing in a project. Investors need to research project fundamentals thoroughly, such as auditing and security measures. This is critical in reducing the risk of falling victim to rug pulls and scams.
Additionally, investors should avoid investing in unaudited projects and those with a high potential for rug pulls. This is especially true for new DeFi projects, which are at a more significant risk of being subjected to rug pulls due to the lack of regulations.

Conclusion

Rug pulls have become more commonplace in the crypto industry, and as such, investors must remain vigilant when investing in projects. The Kokomo Finance rug pull was a sobering reminder of the importance of proper due diligence and research before investing in a project. Investors should also avoid investing in unaudited projects or those with high potential for rug pulls.

FAQs

1. Can investors recover their losses from the Kokomo Finance rug pull?

Unfortunately, in most rug pull cases, investors are unable to recover their losses. Investors should perform proper due diligence before investing to reduce the risk of becoming victims of scams.

2. How can investors avoid becoming victims of rug pulls?

Investors should research project fundamentals thoroughly, such as auditing and security measures. Additionally, investors should avoid investing in unaudited projects and those with high potential for rug pulls.

3. What are some of the warning signs of a potential rug pull?

Some warning signs of a potential rug pull include unrealistic promises of high returns, unverified smart contracts, and unprofessional websites. Investors should take these red flags seriously and perform proper due diligence before investing.