ZkSync Project Accused of $3.5 Million Rug Pull

ZkSync Project’s Gemholic Faces Rug Pull Allegations After $3.5 Million Disappears

The cryptocurrency community is in an uproar following a suspected “rug pull” incident involving the Gemholic project built on the zkSync network. Several investors who believe they were scammed by Gemholic have taken to social media platform X to voice their concerns.

NSerec, founder of Zkmarkets, publicly accused Gemholic of stealing $3.5 million in cryptocurrency. In an X post, NSerec claims that Gemholic misled investors for a year with promises of refunds. However, once the project’s locked funds became accessible due to a recent network upgrade, the Gemholic team allegedly withdrew the funds and vanished.

Further fueling the controversy, NSerec highlighted that the address linked to the creation of the Gemholic contract reportedly received funding from cryptocurrency exchange Binance. NSerec urged the community to investigate whether Binance could play a role in contacting those responsible.

Silence from KYC Provider Raises Questions

SolidProof, a company providing Know Your Customer (KYC) verification services, had previously verified Gemholic. However, in the wake of the alleged rug pull, SolidProof has remained silent on the matter. NSerec believes this silence is an attempt to quell investor fear and uncertainty.

He argues that a KYC provider has two options in such a situation: either publicly acknowledge shortcomings in their verification process or report the fraudulent activity to authorities and inform the public. NSerec suggests that continued silence from SolidProof undermines their credibility, and proposes that affected users hold the company accountable. He even facetiously suggests renaming them “UselessProof” if they fail to take action.

Locked Funds Unlocked, Then Disappear

The root of the problem lies in a technical error within the Gemholic project’s sales contract. This error, identified by Matter Labs (developers of zkSync), prevented the project from accessing its funds for over a year. zkSync’s recent v24 upgrade fixed the issue, allowing Gemholic to finally access the locked funds.

However, shortly after the upgrade, the Gemholic project withdrew 921 Ether (ETH), currently valued at approximately $3.6 million, from the contract and transferred it to the Ethereum blockchain. Furthermore, the project’s X account and all Telegram communication channels were deleted, raising strong suspicions of a rug pull.