While the decentralized finance (DeFi) ecosystem continues to boom, it is also serving a reminder of the ICO days of 2017 when projects raised funds via token sales only to under-deliver or pull an exit scam leaving investors scratching their heads in losses.
Barely two days after the launch of the DeFi project Yfdex.Finance (YFDEX), a liquidity mining pool, recent reports allege that the creator(s) of the project pulled an exit scam with millions of dollars worth of investors’ funds in their purse. While we cannot exactly ascertain how much investors lost to the ploy, the founders have apparently gone underwater.
The unfortunate event was first shared on Twitter by Crypto analyst and investor Cryptowhale, who noted that YFDEX promoted themselves on Medium and other websites for two days, after launching on Sept 8 and describing itself as “a powerful player of industry (sic) that breaks down all barriers.”
Another day, another DeFi scam!
After promoting themselves on Twitter for 2 whole days, Yfdexf has taken a total of $20M of Investors funds in their recent exit scam.
99.99% of DeFi Tokens are scams, and will go this route. Please be very careful if you are heavily Invested. pic.twitter.com/WEkg7Sqo9i
— CryptoWhale (@CryptoWhale) September 9, 2020
Announcing the pre-sale on its Telegram discussion group, the project reportedly noted that the pre-sale was to last only four hours “until the hard cap is reached… [and any] unsold tokens would be burned immediately.”
It was alleged that YFDEX promised investors would receive 12 YFDEX tokens for each Ether (ETH) deposited, only to pull off an exit less than two days later.
While it is difficult to find out exactly how many tokens were sold directly to investors, data from Etherscan shows that the project did burn 16,160 tokens in a transaction, which perhaps boosted investor confidence about the project.
Over 200 transactions of the token took place on decentralized exchange protocol, Uniswap with the price of the transactions increasing to as high as 0.1ETH ($36.06 per token) at some point. The last recorded transaction swapped 10 YFDEX tokens for just 0.002ETH ($0.73), showing how quickly the price has plummeted in the last 48 hours.
Meanwhile, some 49 addresses hold the now “worthless” YFDEX tokens since the project’s founders, Twitter handles and Telegram channel no longer exist.
All platforms and websites that were supposedly used to promote the project now return an error message, including the protocol’s website and its page on Medium.
Is DeFi worth the risk for investors?
Several industry experts have warned about the risks of DeFi, including Ethereum co-founder Vitalik Buterin who warned that people are underestimating the DeFi risks while adding that he is done with yield farming until the dust settles.
On the contrary, though, OKEx CEO Jay Hao believes that Bitcoin and Ethereum will greatly benefit if the DeFi bubble bursts, but DeFi will survive in the long run even after it temporarily dies off.
This article is Originally posted on CoinCentral.com
Author: Caroline John