zkSync Project Gemholic Accused Of $3.5 Million Rug Pull – Details

zkSync-based project Gemholic has been suspected of orchestrating a rug pull following a series of malicious moves on Saturday. The company behind the defunct decentralized exchange GemSwap has transferred out formerly inaccessible investor funds raising suspicions from the general crypto community.

Gemholic Vanishes From Social Media After Moving Investors’ Funds

In April 2023, Gemholic had 921 Ether (ETH), worth $1.7 million as of then, accidentally locked in one of its zkSync smart contracts, the GemstoneIDO due to an error in the transfer()function. After receiving a request for help from Gemholic, the development team at zkSync announced that the funds were intact and they had developed a solution to unlock the said contract. 

On June 7, 2024, zkSync implemented its recent v24 network upgrade on its mainnet which rectified this contract error, allowing Gemholic to gain access to the previously-locked funds. However, following this development, the team at Gemholic has withdrawn the 921 ETH now valued at $3.5 million from the project’s contract to an unassociated Ethereum wallet.

Furthermore, the zkSync-based project has now wiped off its digital footprint disabling all Telegram channels and X accounts. As expected, these actions have resulted in many crypto enthusiasts accusing Gemohlic of executing a rug pull after making false promises to investors over the last year. 

Gemholic had clearly stated the project would resume following the recovery of the locked funds. Notably on April 21, 2024, they posted on X saying:

We understand that many people have lost faith, but we still believe that the @zksync team can make things right. We need everyone to trust us. As soon as the contract is fixed, we will launch a marketing campaign and a pre-launch for the project. We will also refund the overflow…

However, with what appears to be a heist, Gemholic may be adding to a long list of rug pulls in the crypto space which is already a prominent concern with the nascent industry.

Web3 Dev Criticizes KYC Provider Over Silence

In more news, a Web3 developer with X handle @Nserec has called out blockchain security company SolidProof for their inability to address the alleged rug pull by the Gemholic after conducting the Know Your Customer verification process for the now defunct zkSync-based project. 

NSerec postulates this prolonged silence may be an attempt to prevent fear, uncertainty, and doubt (FUD) among customers. However, the developer demands that SolidProof release a statement admitting their ineptitude or report the case to appropriate legal authorities with an accompanying announcement.

Meanwhile, NSerec has also admonished affected customers of Gemholic’s alleged rug pull to reach out to Binance, as the project’s creator contact was initially funded by the prominent exchange.