$4M 'exit scam' suspected as Kokomo Finance flies off radar, token plunges

Optimism-based lending protocol Kokomo Finance has been suspected of a $4 million “exit scam” that has seen user funds plucked out from the platform via a smart contract loophole.

Blockchain security firm CertiK alerted its followers to the “exit scam” in a March 26 Twitter post, noting that the Kokomo Finance (KOKO) token has plummeted 95% in value in a matter of minutes.

CertiK also noted that Kokomo Finance removed all social media accounts immediately following the alleged rug pull too.

Kokomo Finance has either deactivated or deleted its Twitter account. Source: Twitter

CertiK said the deployer of KOKO attacked the smart contract code of a wrapped Bitcoin token, cBTC, by resetting the reward speed and pausing the borrow function.

After that, an address beginning with “0x5a2d..” approved the new cBTC smart contract to spend over 7000 Sonne Wrapped Bitcoin (So-WBTC).

#CertiKSkynetAlert

On 26 March 2023, Kokomo Finance conducted an exit scam and stole ~$4 million in user funds.

Details Below https://t.co/BEPwfahblz

— CertiK Alert (@CertiKAlert) March 26, 2023

The attacker then called another command to swap the So-WBTC to the 0x5a2d address, which produced a $4 million profit, according to the security firm.

Changes to the smart contract code of the KOKO began at about 9 am UTC on March 26. Source: Optimistic Etherscan

A CertiK spokesperson told Cointelegraph that it was the largest "incident" that they’ve detected on Optimism.

Kokomo Finance is an open-source and non-custodial lending protocol on Optimism, where investors could trade for wBTC, Ether (ETH), Tether (USDT), USD Coin (USDC) and DAI.

Kokomo Finance rose up the ranks quickly in recent days, with blockchain data platforms like CoinGecko and DefiLlama officially tracking it shortly after Kokomo Finance went live on Optimism on March 25.

The price of Kokomo Finance token, KOKO fell over 97% at about 4:10pm UTC time on March 26. Source: CoinGecko

Recent screenshots reveal that more than $2 million was locked into Kokomo Finance prior to it falling more than 97%.

@KokomoFinance is an open source and non-custodial lending protocol built on Optimism and @arbitrum .
- Launch on @DefiLlama
- Audited by @0xGuard $KOKO TVL : 2M, is continuously increasing, money will flow into this lending platform soon when it is deployed on @Arbitrum. pic.twitter.com/RduuHBWX39

— Az.eth (@0x_az) March 26, 2023

Over 72% of the total value locked in the Kokomo Finance protocol came in the form of wrapped Bitcoin, according to data from DefiLlama.

Cointelegraph attempted to access all social media and blog websites listed on Kokomo Finance’s Linktree page, however, all of these links now lead to some form of an error page, suggesting the page has been removed.

Related: 7 DeFi protocol hacks in Feb see $21 million in funds stolen: DefiLlama

Cointelegraph came across Kokomo Finance’s smart contract audit, which was reviewed and shared by 0xGuard earlier in March.

While most aspects of the audit were passed, “typographical errors” were found and the owner of the KOKO token was found to have a one-time ability to 45% of the maximum supply to an arbitrary address.