HatchDAO Rug Pull

Notice: This page is a freshly imported case study from the original repository. The original content was in a different format, and may not have relevant information for all sections. Please help restructure the content by moving information from the 'About' and 'General Prevention' sections to other sections, and add any missing information or sources you can find. If you are new here, please read General Tutorial on Wikis or Anatomy of a Case Study for help getting started.

Notice: This page contains sources which are not attributed to any text. The unattributed sources follow the initial description. Please assist by visiting each source, reviewing the content, and placing that reference next to any text it can be used to support. Feel free to add any information that you come across which isn't present already. Sources which don't contain any relevant information can be removed. Broken links can be replaced with versions from the Internet Archive. See General Tutorial on Wikis, Anatomy of a Case Study, and/or Citing Your Sources Guide for additional information. Thanks for your help!

HatchDAO

An anonymous individual or team launched the HatchDAO token system which appeared to be an experimental DAO, and took advantage of the reputation of the TrustSwap service to gain the trust of more participants. TrustSwap, however, can't guarantee the security of a smart contract hot wallet, and claims that isn't their function. Despite the TrustSwap lock, HatchDAO still minted a large number of tokens, diluting the supply in a "rug pull" and stealing $47k from investors.

This is a global/international case not involving a specific country.

About HatchDAO

"HatchDAO.Finance is one of the newest community led and governed projects on the Ethereum blockchain. Users will be able to create proposals, stake their HATCH tokens and farm through their sandbox infrastructure."

"Hatch DAO is a decentralized autonomous organization that aims to be the universal repository for researchers and developers to experiment with various decentralized consensus protocols in DAOs. With our sandbox, users will be able to vote, create proposals, or deploy their own DAOs utilizing our unique toolkits, and be rewarded in $HATCH for their contributions."

"Hatch DAO aims to be the universal repository for yield farmers, developers, and researchers to experiment with various decentralized consensus protocols within our sandbox. Users can stake, farm, vote, or create a proposal with the $HATCH token, and are rewarded for doing so. Utilizing the $HATCH token, individuals will be able to vote on or create proposals that will be used to determine the future of the project. This may range from changes in tokenomics all the way to a change in the governance protocol."

"With Hatch’s incentives built into the governance protocol, issues commonly seen in existing DAOs (such as lack of participation from users) are nonexistent. In the near future, Hatch DAO intends to offer a risk free sandbox environment for users to create and vote on proposals using Hatch’s native governance token ($HATCH)."

"HatchDAO has some really interesting tokenomics. The initial circulating supply of HATCH will be completely dependent on how many tokens get sold during the presale hosted on Bounce Finance. Every HATCH token that remains unsold after the presale’s end will be burned."

"HatchDAO had used SmartLock to lock their team tokens and TrustSwap had publicly announced this fact." "Congrats to @HatchDAO for giving their community the peace of mind that their team tokens are now locked and vested using TrustSwaps fully audited SmartLock Technology." "Although the team tokens were locked, the liquidity was not. The HatchDAO project pulled their liquidity, known as a ‘rug’."

"News of the Hatch DAO rug pull came late on Friday when the token was priced at around $1.80. Following what is becoming a tried and tested method, developers were able to mint the entire token supply of 2 million tokens and sold them for ETH on Uniswap, netting themselves nearly $46,500 and crashing the token price to just over $0.01 in the process." "In this case, because we are talking about a decentralized exchange (DEX), in practice the criminals used the platform to create a pool with tokens, and they made the pool grow, until they withdrew the liquidity by taking all the tokens and leaving a virtually unusable pool."

As "one user commented" “Running a scam is such hard work these days between running telegram, creating a lite paper, and making a website. Let Trustswap make your scamming job easier by providing the false sense of security your users needs for you to scam them properly.”

"TrustSwap's security was for the confidence of team token lockup. It doesn't provide any security for a minting potential, which is what happened with Hatch." "Many people assumed that team token locks prevented any/all scams. From this, it became clear that TrustSwap needed to alter our PR messaging and branding, and we have done exactly that."

"$HATCH and @GemSwap both did a rug pull today. They came across pretty polished but this industry is unforgiving. Service like $DGVC become more important now to safe guard against rug pulls! Will leave it to them to elaborate what they do to safeguard investors."

"Hatch DAO developers minted all the tokens in the smart contract late on Friday and sold out, performing what the community has come to call a ‘rug pull’, which has become something of an occupational hazard for Uniswap traders. DxSALE announced their airdrop of their own SALE tokens to HATCH victims shortly after the rug pull, with victims able to claim once the project has developed a dApp to manage the claims."

"We've received allegations that the team has abandoned the project. Please proceed with caution." "DxSALE, a platform that supports and promotes secure decentralized token sales, has offered an airdrop to victims of the recent exit scam by Hatch DAO."

This is a global/international case not involving a specific country.

The background of the exchange platform, service, or individuals involved, as it would have been seen or understood at the time of the events.

Include:

• Known history of when and how the service was started.
• What problems does the company or service claim to solve?
• What marketing materials were used by the firm or business?
• Audits performed, and excerpts that may have been included.
• Business registration documents shown (fake or legitimate).
• How were people recruited to participate?
• Public warnings and announcements prior to the event.

Don't Include:

• Any wording which directly states or implies that the business is/was illegitimate, or that a vulnerability existed.
• Anything that wasn't reasonably knowable at the time of the event.

There could be more than one section here. If the same platform is involved with multiple incidents, then it can be linked to a main article page.

The Reality

This sections is included if a case involved deception or information that was unknown at the time. Examples include:

• When the service was actually started (if different than the "official story").
• Who actually ran a service and their own personal history.
• How the service was structured behind the scenes. (For example, there was no "trading bot".)
• Details of what audits reported and how vulnerabilities were missed during auditing.

What Happened

The specific events of the loss and how it came about. What actually happened to cause the loss and some of the events leading up to it.

Key Event Timeline - HatchDAO Rug Pull

Date	Event	Description
September 26th, 2020	Main Event	Expand this into a brief description of what happened and the impact. If multiple lines are necessary, add them here.

Technical Details

This section includes specific detailed technical analysis of any security breaches which happened. What specific software vulnerabilities contributed to the problem and how were they exploited?

Total Amount Lost

The total amount lost has been estimated at $47,000 USD.

How much was lost and how was it calculated? If there are conflicting reports, which are accurate and where does the discrepancy lie?

Immediate Reactions

How did the various parties involved (firm, platform, management, and/or affected individual(s)) deal with the events? Were services shut down? Were announcements made? Were groups formed?

Ultimate Outcome

What was the end result? Was any investigation done? Were any individuals prosecuted? Was there a lawsuit? Was any tracing done?

Total Amount Recovered

There do not appear to have been any funds recovered in this case.

What funds were recovered? What funds were reimbursed for those affected users?

Ongoing Developments

What parts of this case are still remaining to be concluded?

General Prevention Policies

There were no assets lost in this case. Any losses were caused because the security token value dropped.

The risk of rug pulls can be reduced by having funds managed by known individuals and stored in offline multi-signature wallets with greater accountability.

Individual Prevention Policies

No specific policies for individual prevention have yet been identified in this case.

For the full list of how to protect your funds as an individual, check our Prevention Policies for Individuals guide.

Platform Prevention Policies

Policies for platforms to take to prevent this situation have not yet been selected in this case.

For the full list of how to protect your funds as a financial service, check our Prevention Policies for Platforms guide.

Regulatory Prevention Policies

No specific regulatory policies have yet been identified in this case.

For the full list of regulatory policies that can prevent loss, check our Prevention Policies for Regulators guide.