Polywhale profit-sharing protocol drained of millions of dollars, halts protocol development after being drained
The yield aggregator protocol Polywhale in the Polygon ecosystem withdrew 1 million USDT from the protocol earnings last week, claiming it would be used for future protocol development, but has now announced the cessation of protocol operations.
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Polywhale Soft Rug Pull
In an official statement, the Polywhale team announced that due to poor token economics, market conditions, as well as the psychological pressure from community accusations (claiming Polywhale is a fraudulent project) and threats, they will cease development on the protocol. The statement also emphasized that the team will now focus on "providing due compensation to staff and contract deployers."
The official Telegram group of Polywhale was deleted yesterday. Despite the team's explanation for the unexpected shutdown, the community still collectively believes that the project was a malicious scam. The Polywhale community refers to this event as a "soft rug pull," where the project founders sell their tokens on the market for stablecoins and immediately abandon development of the protocol.
Although Polywhale was not the largest project in the Polygon ecosystem, it had still accumulated a significant number of users and funds since its launch.
Last week, the total value locked (TVL) on the Polywhale platform exceeded $100 million. However, it was also last week when the team started withdrawing $1 million USDT from protocol earnings, claiming it would be used for future development. Simultaneously, as the funds were withdrawn, they were transferred via a cross-chain bridge to the Ethereum network, ultimately flowing to Binance exchange. The community accuses:
"They drained the funds five days ago and are still promoting new features in the community. This is not a simple shutdown; it's a rug pull."
Over the weekend, two other smaller yield aggregation protocols, Polycash Finance and Polysa Finance, also sold their tokens and deleted their official community social media accounts. It is advised for investors to do thorough research when participating in DeFi projects, especially when most projects look similar and the teams are anonymous. You never know if these projects are traps set by the same group of people with low-cost setups.