In February 2024, BitForex, a cryptocurrency exchange based in Hong Kong, performed a suspected rug pull. Before going dark, an estimated $56.5 million in cryptocurrency was removed from the exchange’s wallets.
Inside the Rug Pull
The BitForex cryptocurrency exchange was plagued with difficulties before its potential February exit scam. The organization was already under regulatory scrutiny in Japan for operating without a license and was accused of inflating trading volumes on its platform, making it look like the platform was more successful than it was. In January 2024, the platform boasted a peak of over $4.2 billion in trading volume. These investigations potentially contributed to the abrupt departure of its CEO, Jason Luo, in January 2024.
The alleged BitForex exit scam was first identified by ZackXBT based on on-chain activity across multiple chains. An estimated $56.5 million was removed from the exchange’s wallets before it ceased operations. At this point, the exchange also stopped processing requests for withdrawals, preventing depositors from accessing their assets.
On February 21, the exchange’s Telegram and social media accounts stopped posting and responding. The platform’s website was also rendered inaccessible, presenting an error message that it was blocked due to active Cloudflare DDoS protections.
However, this was likely designed as a means of rapidly cutting off access to the site as part of a rapid shutdown. There have also been reports that the exchange was deleting messages from users on its social accounts that identified issues with the platform and that the exchange’s community admin was inactive and changed their username. Additionally, customer support requests went unanswered, further supporting the belief that the company had pulled an exit scam.
Lessons Learned from the Rug Pull
The BitForex exit scam has significant potential implications for both its users and the cryptocurrency community as a whole. Those users who had assets deposited with the platform are unlikely to be able to retrieve them as it ceases operations and seemingly absconds with millions in deposited assets. Additionally, the project owned about 18% of the Tellor (TRB) and 7% of the Ecomi (OMI) token supplies, which could have significant impacts on the values of these tokens if the BitForex team dumps those assets on the market.
Rug pulls are a common threat in the DeFi space, especially for struggling projects. Click here to learn more about how to identify the warning signs of an exit scam or rug pull.