Gemholic Accused of $3.5M Rug Pull After zkSync Network Upgrade Unlocks Ethereum Funds

• Gemholic, a zkSync-based project, is under scrutiny for suspected fraudulent activities after transferring investor funds.
• The project initially garnered attention due to a technical error that locked significant Ethereum (ETH) amounts in its smart contract.
• Investors are alarmed after the team moved the funds and eliminated their social media presence, raising red flags about a potential scam.

Gemholic faces severe allegations of a possible rug pull after transferring investor funds and disappearing from social platforms.

Gemholic’s Disappearing Act After Moving Locked Funds

Back in April 2023, Gemholic faced a major operational hiccup when 921 Ether (ETH), valued at $1.7 million at the time, was locked due to a flaw in the transfer() function of their zkSync smart contract, GemstoneIDO. Seeking assistance, Gemholic approached the zkSync technical team, which assured the safety of the funds and committed to rectifying the error.

On June 7, 2024, zkSync rolled out their v24 network upgrade, which eventually resolved the contract issue, enabling Gemholic to access the previously unreachable 921 ETH, now worth $3.5 million. However, shortly after liberating these assets, the company transferred them to an unrelated Ethereum wallet and deleted all their social media accounts, including Telegram and X channels. This abrupt and suspicious behavior has prompted the crypto community to suspect Gemholic of executing a rug pull, as the team had previously promised to revive the project after recovering the funds.

Accountability Lapses from KYC Providers

In a related development, a Web3 developer using the X handle @Nserec has criticized SolidProof, the blockchain security firm responsible for Gemholic’s Know Your Customer (KYC) verification. NSerec highlights the company’s silence on the alleged rug pull, suggesting an intent to avoid causing fear, uncertainty, and doubt (FUD) within the community.

He urges SolidProof to issue a statement addressing their failure or report the incident to legal authorities. Additionally, NSerec advises victims of the suspected fraud to contact Binance, as initial funding for Gemholic came through this major exchange.

Conclusion

The Gemholic incident underscores the persistent risks in the cryptocurrency sector, where rug pulls remain a disconcerting issue. Investors must exercise considerable caution when engaging in new projects. The ongoing silence from security providers like SolidProof further complicates the matter, emphasizing the need for enhanced vigilance and accountability in the nascent Web3 space.