On September 5, the price of the native token of Synapse (SNY), a decentralized finance (DeFi) cross-chain bridge, plummeted as unknown liquidity providers on the platform dumped nearly 9 million SYN tokens and removed them from the bridge. All stablecoin liquidity was withdrawn.
Synapse’s official X account acknowledged the “unknown liquidity provider” liquidity rug, while clarifying that the Synapse bridge did not face any security breaches.
A Synapse liquidity provider sold their SYN tokens and exited liquidity today. We are investigating unusual activity on their wallets and working to get in touch with them. Will update as soon as more information becomes available.
There are no security holes in the protocol or bridge.
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— Synapse Labs (@SynapseProtocol) September 5, 2023
After tracing, the unknown liquidity provider involved in the case is Nima Capital, one of the long-term capital partners of the project. The venture capital firm has secured funding for the project in exchange for locking up $40 million worth of liquidity in SYN. Etherscan data shows that the unknown whale who dumped the SYN tokens received 10 million SYN ($3.4 million) on April 5 from the “Synapse: Executor 2” wallet, which does not currently have any SYN tokens.
Venture capital firm rug withdrew its users just eight months before the governance proposal was agreed upon. This became evident after the Nima Capital website went offline and the project also locked down their X (formerly Twitter), an online hack, prompting many to call it a VC rug.
Even venture capitalists are scrambling now @ Nima Capital Dump 9M $SYN And removed all stablecoin liquidity 8 months before the government proposal passed
Their website is offline and twitter is protected pic.twitter.com/1ncxP13XYV
— Wazz (@WazzCrypto) September 4, 2023
Rug Pulls are a fairly common form of scam in the DeFi ecosystem, where the project creator or developer often changes the code or terminates the project after the project’s native token reaches a certain price threshold. Pulling by venture capital firms, however, is uncommon.
related: Newly Discovered Bitcoin Wallet Vulnerability Allows Hackers to Steal $900,000 — SlowMist
The price of the native token SYN fell more than 20% as a result of the token sell-off, hitting a multi-week low of $0.30 before recovering above $0.35 later in the day.
While DeFi bridges make interoperability between different protocols easier, these bridges are often the main target of exploiters, and some of the largest DeFi hacks have occurred on these cross-chain bridge protocols.
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