• The Chibi Finance team disappeared overnight in what seems like a rug pull, PeckShield noted.
  • 555 Ether (ETH) worth around $1 million was drained from the project’s liquidity pools and deposited into the crypto mixer Tornado Cash.
  • The team’s social media accounts and websites also mysteriously vanished, leaving users with no access to the people behind the project.

Crypto project Chibi Finance which runs atop the Ethereum Layer 2 scaling protocol Arbitrum allegedly rugged its users and disappeared with around $1 million in Ether (ETH).

The project styled itself as a yield-optimizing protocol that allowed users to automatically rack up rewards after depositing their crypto tokens on the platform. The platform’s native token CHIBI tanked 98% in value following the incident.

Chibi Finance Team Goes AWOL

On-chain security firm PeckShield reported that the Chibi Finance team drained 555 ETH worth $1 million from the project’s liquidity pools.

According to another security startup CertiK, the developers were able to do this as they added malicious code in Chibi’s smart contract. This allowed the team to steal user funds after the contract was deployed and crypto investment poured in. The CertiK team noted that this is the 12th exit scam tracked so far in 2023.

After stealing the assets, the team moved funds from Arbitrum to Ethereum’s ecosystem. PeckShield said the 555 ETH was then deposited in the crypto mixing service Tornado Cash, an Ethereum-based platform used to obscure transactions.

The protocol is often used by crypto criminals to launder stolen wealth and was sanctioned by U.S. authorities last year due to suspicions that the North Korean hacker group Lazarus uses the service.

Community concerns over a rug pull increased after the Chibi Finance team scrubbed its digital presence following the asset drain. The project’s Twitter profile was deactivated and its website is unavailable. Crypto influencers like @defi_mochi also deleted their posts on the project.

A rug pull is a crypto-native term that refers to a specific type of scam where a project markets a service, builds a following or community that eventually invests in the project, and then disappears with the proceeds leaving users and investors with empty balances or worthless tokens.