Hackernoon logoWhat Does A DeFi Rug Pull Look Like: A Viking Swap Story by@jimqode

What Does A DeFi Rug Pull Look Like: A Viking Swap Story

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Jim Qode Hacker Noon profile picture

@jimqodeJim Qode

I'm a programmer interested in the Cryptocurrency project landscape

March 7th, It was as usual as it gets on the Viking Swap telegram feed. Viking Token price was down %90 from its mouth-watering ATH of 73$. Members were talking about the new NFT burn model that has been said to be worked on by devs.

As usual devs were nowhere to be seen on the channel. When asked about, moderator Enzee remarked that the devs “value their privacy”. Then in a few hours suddenly the telegram channel was locked and Viking Swap’s medium feed and telegram channel both displayed the same message titled “An Ode to Warriors” that announced devs have pulled the plug.

The result was a frenzy of people trying to pull their liquidity assets from the Viking Swap pools. As VIKING token price headed for 0$, those who were hit the worst was the people who staked on the VIKING/BUSD pool. They were able to get a tiny fraction of what they put in if they were lucky.

So what happened? Is this a rug pull? Some new kind of scam? Or just sheer incompetence? Who is at fault here?

Before this story unfolded, I was reading through the Viking Swap contract codes, and sifting through the addresses to understand how it works. Viking swap was obviously a clone of Goose Finance, which in turn seemed to have taken most of its contract code from SushiSwap.

It was one of the many clones most of which seemed to have animal names for some reason. In my short research I didn’t find any vulnerabilities or deliberately put in backdoors in the code. As it was mostly SushiSwap code with migrator removed, and a timelock of 24h put in the administrative functions, it seemed to be quite safe.

Although the tokenomics didn’t really make sense. The swap fees wouldn’t really amount to anything as the site really wasn’t used for swap except for its own token. Most of the value the users get from the system was VIKING tokens that were being constantly minted for stakers.

I checked the token contract history to see 50000 VIKING tokens were preminted to 0x41bc71f56bebf212be0448e2f418c493bbb9f46d before its control was passed to over to MasterChef contract. And this address was also set as the developer fee address.

All VIKING tokens transferred to this address have been burned by sending them to 0x000…dead. But this wallet also had a huge amount EGG tokens that are tokens awarded to Goose Finance stakers. These token came at a steady rate from the Viking MasterChef contract.

They are the %4 deposit fees taken from Viking Swap Armory stakers, which they promised will be used to buyback VIKING tokens, which they never did. This wallet now holds 320K worth of EGG tokens, along with other tokens taken from armory deposit fees adding up to 1.2mil$ at the time of writing.

It seems the “devs” didn’t put much trust in their token after all and they didn’t keep their promise to buyback VIKING tokens with the armory fees. It is possible that all the other functionalities of the service was just a front to pull money into Armory Vaults to get the developer fees. When the armory started to slow down and VIKING token price inevitably tanked they just pulled the plug.

So is this a rug pull? Not really, as the code was solid and none of the staker funds could be moved by the developers. They just took the developer fees that they and never did what what they promised with it, buying back VIKING tokens.

That inevitably to lead to tanking of the VIKING price because all stakers sold their VIKING tokens to realize their “gains”. When the music stopped they shut down the shop and took the developer fees with them. So I think this is an exit scam. And it clearly shows stakers don’t have the knowledge to check if the devs are doing what they promised.

The victims are now gathered at a Telegram Channel called “Valhalla” and discussing what can be done. If you are a victim you can reach the telegram channel here: https://t.me/joinchat/WY9EuMtMkJcxYTJh. It has been discussed that most of the trust they put in the project stems from audits made by Hacken, an Ukrainian Smart Contract Auditing service. Some victims blame Hacken for giving Viking Swap a safe aura.

I don’t really agree with them. They did their job correctly. There were no security problems involved in this scam. The stakers were just blinded by the echo chamber of constant shilling on the telegram channel, and none of them had the expertise or tenacity to review the system as a whole to see what could go wrong. Or maybe someone did but they were dismissed as disseminating FUD.

This highlights that most of the De-Fi projects on Binance Smart Chain is are just clones without any real business model. They are Ponzi Schemes at best. Some aspects are even worse than a Ponzi Scheme as not all the newcomers money trickles up through the layers.

Most of the money goes right through to developers to do with it whatever they want. A true de-fi project should always back their promises with smart contract.

If it was the intention of Viking Swap developers to really buy back VIKING tokens with developer fee money, they could have replaced the developer fee account with a smart contract that does what they promised automatically and verifiably. The fact that they didn’t, shows us it was never their intention all along.

For all the victims, I’m sorry for your loss. Please do your research before venturing forth to uncharted waters next time.

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