On March 26, the Indiana-based non-custodial lender Kokomo finance reported an “exit scam” that exposed the investors to over $4 million loss. The Kokomo team revealed that the protocol’s developers manipulated prices to deceive the investors to buy their idea.
The team restated that the March 26 exit scam involved promoting digital assets with unrealistic returns to persuade investors to invest. After attaining a substantial amount from the scheme, the developers were suspected of deleting cookies and cached data to terminate evidence.
Impact of Exit Scam
On March 25, the Kokomo team was officially launched their lending platform in the crypto market. During the grand opening, the Kokomo team pledged to provide the user with crypto lending services.
The team was delighted to announce that its lending platform built on the Optimism and Arbitrum network will enable traders to transact their wrapped bitcoin (BTC), dai (DAI), and Ethereum (ETH) tokens more effortlessly. Also, the protocol has utilized revolutionary technologies to expedite transactions involving the main stablecoin, such as tether (USDT) and USD Coin amid the current dollar funding crisis.
The unique services provided by the Kokomo team attracted a large clientele of Optimism users. A few hours after the launch, the Kokomo developers leveraged their expertise to launch a malicious attack on the protocol that weakened the system’s security.
The attack enabled the developers to gain access to the protocol and issue false information to promote Kokomo native token KOKO. Surprisingly the developers are accused of developing a rewarding system to attract more investors.
The suspects are accused of switching off the borrowing feature and launching a suspicious contract on the Kokomo protocol.
Kokomo Finance Protocol Exploited
The March 26 exit scam has influenced the Kokomo team to engage internal and external investigators to probe the matter. Based on a report from one of the probing team, the Web3 security firm CetriK revealed that latest developer delinquency aimed at deceiving Kokomo into believing to own higher liquidity than the actual short-term liabilities available.
The CetriK team observed that the developers utilized their digital assets to approve a suspicious crypto transaction of 7000 Wrapped BTC. The team is suspected of using the Bitcoin tokens to drain all available liquidities on the Kokomo platform worth $4 million.
After the successful attack, the developers deleted the supporting data associated with the exit scam. The developers altered the operation Kokomo website and social media accounts.
On March 27, the Asian user were unable to login to their account. Futhermore, the exist scam negatively affected Koko’s reading.
As per data captured by CoinGecko, KOKO dipped by 98.5% in the last 24 hours to exchange hands at $0.00065839. Reportedly, in the previous 24 hours, KOKO prices have hovered around $0.04360637 and $0.00064813 support level.
The KOKO trading volume reached $283,812, while the total supply in a day was close to 10,200,000.