DeFi Digest: Onyx Protocol Lost $2.1 Million as SafeMoon Founders Face Multi-Million Dollar Scam Charges

The decentralized finance (DeFi) sector continues to attract heightened attention from cryptocurrency investors. ForkLog has gathered the most important events and news of the past weeks in this digest.

Key metrics of the DeFi segment

The total value locked (TVL) in DeFi protocols rose to $42.9 billion. Led by Lido with $16.43 billion, the second and third places are held by Maker ($8 billion) and JustLend ($5.74 billion), respectively.

TVL in Ethereum apps rose to $23.4 billion. Trading volume on decentralized exchanges (DEX) over the last 30 days stood at $66.8 billion.

Uniswap continues to dominate the non-custodial exchange market — it accounts for 61% of total turnover. The second DEX by trading volume is PancakeSwap (15.6%), the third is Curve (5.2%).

Hackers withdrew $2.1 million from Onyx Protocol

The lending DeFi platform lost approximately $2.1 million as a result of an illiquid-market exploit deployed on October 27.

According to PeckShield, the attackers exploited a known rounding issue in the popular Compound v2 fork underpinning Onyx’s architecture.

«Essentially, the exploited oPEPE market was deployed five days ago with no liquidity. The pool was filled with borrowed funds, which were then repaid due to the rounding issue»,

The attackers used instant loans to marshal resources for the attack and manipulate exchange rates, said a BlockSec spokesperson.

Two DeFi protocols on Solana blocked British users

Marinade Finance, the largest DeFi protocol on the Solana network, restricted access to the platform for UK users due to “compliance issues” with the FCA.

When attempting to access the DeFi protocol’s site from the corresponding IP, a warning message pops up.

The developers said that “users can withdraw liquidity, close positions or delay withdrawal from staking via the SDK.” For further information, project representatives asked to contact the project email.

The largest DEX on Solana — Orca Finance — also introduced a geo-block for the United Kingdom. The site returns a message nearly identical to Marinade’s. To exit open positions and withdraw liquidity, the platform’s team created a dedicated tool.

On October 8 a new crypto advertising regime began in the United Kingdom. The FCA began labeling companies that do not comply with the rules.

Under the new rules, anyone wishing to promote digital assets must be “authorised or registered with the FCA, or their campaign must be approved by an authorised firm”.

Non-compliance is treated as a criminal offense and is punishable by an “unlimited fine and/or imprisonment for up to two years”.

SafeMoon founders charged in a multi-million-dollar scam

The Eastern District of New York prosecutors indicted the founders and executives of the DeFi project SafeMoon for fraud involving “millions of dollars”.

Authorities allege that John Karoni, Kyle Nady and Thomas Smith deceived buyers of the SFM token issued on a public blockchain.

Respondents claimed that the asset in liquidity pools was “blocked”. Instead, when the project’s capitalization reached $8 billion, the defendants withdrew “tokens worth millions of dollars” which they spent on personal consumption, prosecutors say.

«They intentionally misled investors and redirected funds to feed their fraudulent scheme and enrich themselves by purchasing a Porsche sports car, other luxury cars, and real estate», said Prosecutor Breon Pis.

According to investigators, SafeMoon LLC launched SFM in March 2021. The smart contract provided for a 10% transaction fee on the asset. Half of the commission was distributed among token holders, the other half went to the liquidity pool, where it allegedly was locked.

Within a few months the number of investors surpassed a million, and the capitalization reached $8 billion.

Authorities suspect that the defendants intentionally misled investors about the “blocked tokens”. The defendants not only withdrew funds from pools, but also traded assets, manipulating prices to their advantage.

Publicly they denied owning and trading SFM, and hid the transactions through a complex routing system and anonymous exchange accounts, investigators say. The funds obtained were used to buy luxury cars and real estate in New Hampshire, Utah and Florida.

«For example, Smith, using controlled cryptocurrency addresses, sent 2,900 BNB totaling more than $860,000, which were tracked via the SFM liquidity pool to a third party to purchase a Porsche 911 sports car and a non-fungible token (NFT)», the press release states.

Karoni and Smith have been arrested, Nady remains at large. Prosecutors stressed that the defendants are presumed innocent until proven guilty.

Also on ForkLog:

• The dYdX developers launched their own L1 blockchain based on Cosmos.