Gemholic Project Accused of $3.5M Rug Pull on zkSync Network

Highlights:

• zkSync identifies transfer error as Gemholic locks funds, leading to a potential $3.5M scam.
• Affected users raise concerns on X; NSerec of Zkmarkets confirms $3.5M stolen by Gemholic.
• The community questioned KYC provider SolidProof’s silence amid calls for transparency and accountability.

The cryptocurrency community is in turmoil following suspicions of a $3.5 million rug pull involving the Gemholic project and the zkSync network. Community members are actively trying to trace the contract creator’s address, believing that Binance funded it.

The zkSync project Gemholic had its funds locked due to an error in the sales contract more than a year ago. Yesterday, zkSync completed the v24 upgrade, allowing the locked funds to be recovered. The Gemholic project withdrew 921 ETH from the contract and then transferred it to…

— Wu Blockchain (@WuBlockchain) June 8, 2024

Allegations and Community Response

Several users affected by the alleged scam have raised concerns on social media. NSerec, the founder of Zkmarkets, confirmed that Gemholic had stolen $3.5 million from investors. In a detailed post, NSerec accused the project of deceiving investors for a year by falsely promising refunds. 

Today, $3.5 million was stolen by Gemholic, who for an entire year falsely promised refunds to its investors, only to execute a rug pull after the funds were finaly unlocked. The team has supposedly completed a KYC verification by @SolidProof_io, which has yet to address the…

— 0xMorgosh (@NSerec) June 7, 2024

After unlocking the funds, the project team seemingly executed a rug pull, withdrawing 921 Ether from the contract and transferring it to the Ethereum blockchain. NSerec noted that Binance supposedly funded the contract creator’s address, urging anyone with information to help contact Binance for further action.

KYC Provider’s Silence

Despite completing Know Your Customer (KYC) verification with SolidProof, the verification service has not addressed the incident publicly. NSerec criticized this silence, suggesting it might be an effort to prevent fear, uncertainty, and doubt (FUD) from spreading among investors. 

In the end Gemholic really rugged, people were expecting this from the very start.

All of us waited for over 1.5+ years.

Please suggest what should we do moving forward?

ZK sure sounds like a literal endgame for all of us. @zkSyncDevs @zkLumi @ramonIsTweeting @gluk64 pic.twitter.com/uZAgURRd8K

— Swift | DeFi Data & Growth (@SwiftDefi) June 7, 2024

He stressed that a KYC provider must either admit to failing in their verification process or report the fraudsters to the authorities and inform the public. If SolidProof keeps ignoring the problem, NSerec believes the community cannot trust its service.

Issues with the Contract and zkSync Upgrade

The zkSync project Gemholic had its funds locked for over a year due to a mistake in the sales contract. Matter Labs, the team behind Ethereum layer-2 scaling solution zkSync, identified the issue as stemming from the .transfer() function in the GemstoneIDO smart contract, which is part of the GemholicECO ecosystem. On June 7, zkSync completed its v24 upgrade, which resolved the issue and allowed the locked funds to be accessed.

Following the upgrade, the Gemholic project withdrew 921 Ether from the contract and transferred it to the Ethereum blockchain. Gemholic’s X account and all Telegram messages were deleted, further raising suspicions among the community. Given the alleged funding connection, investors and community members focused on tracing the contract creator’s address and sought assistance from Binance.

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Disclaimer: Cryptocurrency is a high-risk asset class. This article is provided for informational purposes and does not constitute investment advice. You could lose all of your capital.