LeetSwap, a leading decentralized exchange (DEX) operating on Coinbase’s Base network, has halted all trading operations. The exchange announced via Twitter that it had initiated a “security pause” feature in response to potential security threats.
The concern arose when LeetSwap noticed possible compromises in the liquidity of some of its pools.
As our DEX is forked from Solidly, our factory had a security pause function.
We noticed that some pool liquidity might have been compromised and we temporarily stopped the trading to investigate.
— LeetSwap (@LeetSwap) August 1, 2023
LeetSwap Exploit Leads to Drained Liquidity Pairs
The situation took a serious turn as PeckShield, a popular blockchain security firm, revealed that liquidity provider (LP) pairs on Base had fallen victim to an exploit, resulting in approximately 340 ether (ETH) being drained from the platform. This translates to a staggering loss of around $630,000.
— PeckShieldAlert (@PeckShieldAlert) August 1, 2023
However, LeetSwap claims to be currently working with on-chain security experts to recover the lost 340 ETH from its liquidity provider pairs.
The exchange’s trading system is a fork of Solidly, incorporating a security pause function. As such, the project tweeted that this function was activated to address the potential security breach and prevent further damage.
Several analysts in the blockchain community have provided insights into how the exploit might have occurred. Wintermute’s research head, Igor Igamberdiev, suggested that the attacker exploited an exposed smart contract function.
This manipulation likely caused a token’s price to soar, enabling the attacker to drain wrapped Ether from LeetSwap’s liquidity pools.
The price of LEET, the LeetSwap token, fell dramatically as a result of this incident, falling by a staggering 40% in just hours followed by a freeze of all activities and a total drop of 100% afterward. It dropped to $$0.00000002 from $14.39 on CoinMarketCap after recovering from the original drop of $25.59 at press time.
Concerns and Speculations Grow in the Crypto Community as LEET is called a Rug Pull
The incident at LeetSwap is the second Base-related controversy to unfold recently. Earlier, a memecoin called BALD, which runs on Coinbase’s Layer 2 blockchain, faced liquidity removal, sparking allegations of a rug pull. This incident prompted crypto fans on Twitter to engage in heated debates and conspiracy theories.
One such theory suggested a potential link between FTX founder Sam Bankman-Fried (SBF) and the memecoin. Notably, despite SBF reportedly not having access to the internet while he is currently under house arrest, a user dug up some of his earlier tweets to make some connections between them and the way the BALD meme coin’s Twitter handle tweets.
The user “hype” speculated that there may be a connection between SBF and the BALD meme coin’s Twitter handle based on the similar sentence structures in their tweets.
For instance, he found that SBF often uses single words like “correct” to respond to tweets, while the BALD meme coin’s Twitter handle also frequently responds with the same word.
Other words and phrases that are common between the two Twitter handles are “nor” and “quite well,” according to some screenshots posted by Hype.
Using "correct" as a single word response:https://t.co/QFEKlkRTjH
— hype (@hype_eth) July 31, 2023
Nevertheless, certain crypto analysts dispute the possibility of SBF’s involvement in the scheme, citing strict internet restrictions under his bail terms.