ZkSync’s Gemholic Project  Accused of $3.5 Million Rug Pull

Key Takeaways

• Following the upgrade, the Gemholic project withdrew 921 Ether from the contract and transferred it to the Ethereum blockchain.
• N Serec alleged that the Gemholic team executed the theft despite completing the blockchain security firm Solidproof’s KYC process. 

A project on the Ethereum layer 2 scaling solution zkSync, called Gemholic, is facing accusations of a rug pull after it withdrew $3.5 million in Ether (ETH) from the platform’s smart contracts. In the crypto space, a rug pull is defined as a scam in which a crypto developer promotes a project to attract investor funding, only to shut down or disappear, taking investor assets with them.

 In April last year, Matter Labs, the team behind zkSync, announced that 921 Ether worth $1.7 million was stuck in one of its new smart contracts, GemstoneIDO owing to an error in the transfer()function. However, earlier this month on June 7,zkSync completed its v24 upgrade, which fixed the contract error and allowed the locked funds to be accessed.

Following the rug pull accusation,  the zkSync-based project has deleted its digital footprint disabling all Telegram channels and X accounts sparking more suspicions. Social media is plagued with affected users who claim that instead of utilising the recovered funds as intended, the Gemholic team allegedly transferred the now $3.5 million worth of ETH to an unrelated wallet.

Social media user and ZK Markets founder, NSerec, claims that Gemholic completed a Know Your Customer (KYC) process with blockchain security firm Solidproof before the alleged theft. Serec suggests that Solidproof’s silence on the matter raises concerns and could be an attempt to avoid negativity.

Serec further accuses Gemholic of misleading investors for a year with promises of refunds before allegedly vanishing with the recovered funds. He urged the users affected by the incident to contact both Solidproof, questioning their verification process.NSerec revealed that the address of the contract creator was supposedly funded by Binance and urged users to reach out to the crypto exchange.

The latest development comes amid rug pulls becoming a common phenomenon in the crypto space. One of the biggest cryptocurrency frauds was a rug pull scam orchestrated by the Ponzi scheme OneCoin, which raised $4 billion and defrauded people of billions of dollars by promising investors returns on their crypto investments and pitching the company as a legitimate business.