Binance Smart Chain accommodates various small business decentralized finance firms on its blockchain. BNB42 was one such platform that brought investment opportunities for BNB holders. The fraudulent platform operated as a virtual market that facilitated user-to-user deals without a centralized body. Reportedly, the website offered 1.5% per day for the BNB investments and had a significant user count before the detection. The official website of BNB42.com is currently not reachable.
Binance Smart Chain is one of the largest and well-known Ethereum projects currently active in the market. Thanks to its affordable infrastructures and easily accessible launchpad, Binance has been supporting many small-scale businesses to utilize the opportunities of decentralized finance. However, there is a flip side to this story where the support also lets in people who maliciously appropriate the opportunities to exploit other users. The deployer, according to PeckShield, obtained more than 6,400 BNB or $2.7 million from an unconfirmed contract. In the cryptocurrency sector, a rug pull is a malicious action in which crypto engineers quit a project and flee with investors’ money.
Rug pulls are common in the decentralized finance (DeFi) ecosystem, particularly on decentralized exchanges (DEXs). Malevolent individuals create a token, list it on a DEX, and then couple it with a popular cryptocurrency such as BNB in this case. The developers then remove everything from the liquidity pool, bringing the coin’s price to zero after a large number of naïve investors switch their crypto for the listed token. Check out this BNB price prediction to know if the current situation could affect the token’s price in the near future.
According to PeckShield’s detection, a BNB42 fraudster drained more than 6400 BNB, which is close to $2.7 million. The funds were pulled from an unverified address and distributed later among eight different addresses. As per the reports, the investment platform operated with the cover of virtual mining and offered an unrealistic profit of 200%. The accumulated funds were then withdrawn into unverified wallets, and the website was taken down.
Soon many in the community tried to locate the address of the funds and the fraudsters. They were successful in locating those who aided and abetted this scam through the traces they left on the chain. The scammers used wallets through the Telegram application. A Twitter user revealed that nearly $2 million were being laundered through the Tornado.cash app. It could mean that a large number of victims of this scam could be from Venezuela. The funds lost in this scam range from 1 BNB to several hundred BNBs.
Although the recent rug pull is financially less impactful in comparison to other incidents, it raises essential questions about regulatory measures on the blockchain. Also, it is not the first time Binance has witnessed a rug pull as Uranium Finance drained nearly $50 million last April. If such fraudsters can easily utilize the platform to embezzle others, it is time for Binance Smart Chain teams to start asking the pressing questions. The number of people trying to exploit the unquestioning optimism of decentralization is increasing exponentially. The illicit revenue through rug pulls increased from 1% to 37% in just a year since 2020.
