Kokomo Finance Lending Protocol Exit Scam

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Kokomo Finance Promotion

Kokomo Finance was a newly launched open-source and non-custodial lending protocol built on Optimism and Arbitrum. It allowed users to lend and borrow digital assets, and its token KOKO had a 14-day genesis mining program. The protocol's audit, conducted by 0xGuard, only covered the token contract, not the entire protocol. Within a week of its launch, the protocol was exploited, resulting in the loss of around $4M, and the project's website, Twitter, GitHub, and Medium accounts were deleted. The attacker targeted the wrapped Bitcoin deposits, and even though $2M of tokens still remain in the project's pools on Optimism, the contracts are paused, and users can't withdraw funds. Kokomo Finance is unlikely to recover.

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

About Kokomo Finance

"Kokomo Finance [was] an open source and non-custodial lending protocol on Optimism and Arbitrum."

"Kokomo Finance, an open source and non-custodial lending protocol. Enter http://kokomo.finance to lend, borrow and earn $KOKO here. A 14-days genesis mining starts now with a decent APR!"

"Hola Degen! After a long research, found a permission-less lending protocol to help the user to lend and borrow digital assets. The name of protocol is - @KokomoFinance which is built on @optimismFND Now lets jump to some depth of this protocol"

"The project’s audit, conducted by 0xGuard, covered just the token contract, rather than the protocol at large."

"1/ The deployer of KOKO Token, address 0x41BE, deployed attack contract cBTC. Then set the reward speed, paused the borrow and set the implementation contract into a malicious one.

2/ Address 0x5a2d… approved the cBTC contract to spend the 7010 sonne WBTC.

3/ Since the implementation contract has been upgraded to the malicious cBTC contract, the attacker called 0x804edaad method to transfer sonne WBTC to address 0x5C8d.

4/ Finally, the address 0x5C8d.. swapped 7010 sonne WBTC to 141 WBTC (~4M) for profit."

"The lending protocol had launched on Optimism less than a week ago, and its token, KOKO, less than 36 hours before the rug."

"Kokomo Finance took off with approximately $4M, deleting their website, Twitter, GitHub and Medium in the process."

"Wrapped Bitcoin deposits were rugged via changes made by the project’s deployer address. Almost $2M of tokens still remain in the project’s pools on Optimism.

But with the contracts paused and users unable to withdraw funds, the question remains…

…will they be back for the rest?"

"Whatever the future holds for Optimism, one thing’s for certain:

Kokomo has flatlined."

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 - Kokomo Finance Lending Protocol Exit Scam

Date	Event	Description
March 26th, 2023 9:58:05 AM MDT	Exit Scam Transaction	The blockchain transaction to remove liquidity from the smart contract.

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 $4,000,000 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?

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.