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Coinbase has recently launched “Base” to cultivate a community of developers focused on creating decentralized functionalities for its users. While Base aims to improve the exchange’s utility and promote increased customer interaction, this new blockchain has seen the emergence of over 500 fraudulent tokens in a short span.
Creators of scam tokens capitalize on “hype, promises, and manipulation of price and volume.” The excitement surrounding the Base network is no exception. As reported by the New York-based crypto market integrity firm Solidus Labs, scammers have generated around $2 million in profits through these activities.
Fraudulent Activities on Coinbase-Incubated Base
A recent analysis by Solidus indicated that scam tokens garnered approximately $3.7 million in trading volume on decentralized exchanges associated with Base. During this time, the fraudsters executed $2.7 million in purchases, $700,000 in sales, and $300,000 in wash trades.
Scammers utilize one of two strategies to gain from their schemes:
- Quickly withdrawing all liquidity from their DEX pairs after a significant number of users have invested – totaling $1.7 million, or
- Creating an excessively large number of new coins through “minting” and then selling them, leading to a depletion of the DEX pair’s Ether reserves, amounting to $300,000.
BALD Rug Pull
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In addition to the presence of numerous scam coins, Solidus researchers noted “deceptively promoted and traded” cryptocurrencies that entered Base between mid-July and its public launch in August.
Initially, Base had limited traction when it was opened to developers. However, the emergence of BALD triggered a sudden influx of capital and users. This initial excitement surrounding the memecoin propelled prices by 4,000,000% from its issuance and attracted over $68 million from traders.
The creator of BALD reportedly earned more than $5.2 million after promoting the token on X (formerly known as Twitter) and inflating its price on a Base-based decentralized exchange named LeetSwap.
A representative from Solidus informed Bloomberg,
“We encourage consumers to conduct thorough research before engaging with any dapp [decentralized application], on Base or any other chain, just as they would on the open internet.”
Base is open to all users, but this accessibility also reveals vulnerabilities that scammers take advantage of. Analysts from Solidus Labs warned users about meme coins and decentralized exchanges on the layer-2 solution, as funds lost to rug pulls or tokens exclusive to these DEXes provide no means for recovery or withdrawal in the event of an exploit.
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