$1 500 000 USD

JUNE 2021




PolyButterfly aimed "to be a self-sustaining DeFi protocol consisting of Yield Aggregators, Swap, Lending/Borrowing, Structured Products and even Games." It was an "autonomous #Defi protocol on $MATIC. Just enter the #ETH address and 40 #airdrops will be sent to the first 500 people. * Only accounts that have been created for more than 3 months." "PolyButterfly - A next evolution DeFi on Polygon. The most popular AMM on Polygon by user count! Earn POLLEN through yield farming, then stake it in pools to earn more tokens!" "@PolyButterflyFi aims to be a DeFi protocol consisting of Yield Aggregators, Swap, Lending/Borrowing, Structured Products and even Games. Stake your $GEN to earn $POLLEN!"


"While the net amount of losses is nowhere near that of the largest DeFi rug pulls on Ethereum (ETH) and Binance Smart Chain (BSC), the activity of malefactors on Polygon has gained traction in Q2, 2021."


"[T]he PolyButterfly code had a dangerous backdoor that allows the product team to remove customers' liquidity." "Earlier this morning our scanners noticed that a function to adjust the weight of a pool could also change the token of that pool. Our beloved dev Carlos quickly pointed out the dangers of doing this." "Just one extra parameter allows the owner to steal all funds. This happens often and our scanners almost always find it, but this project looked promising so we wanted to give them the benefit of the doubt."


"(1) Create pool with a token only you own and deposit a bazzilion tokens. (2) Update the new pool's token to MATIC. (3) Withdraw the matic with your existing balance. (4) Repeat 3,4 for all tokens."


"We proposed a solution: Give ownership to a proxy contract that does not allow to change the token of an existing pool." "After some words they deployed it but with this extra line of code, what does it do: It allows the Proxy to give the ownership to another wallet. Thus the proxy solution we provided them can be circumvented completely." "At this point we were pretty certain they were playing with us, but we wanted to make sure so we hinted at this functionality in the hopes that they would explain why they added it."


On "June 5, 2021, Polygon-based decentralized financial protocol PolyButterfly vanished." "After users noticed that PolyButterfly had disappeared, nearly all social media platforms also disappeared. Specifically, the website was shut down and the Twitter account and Telegram chat series were deleted."


"According to RugDoc DeFi transparency enthusiasts, scammers stole more than 600 Ethers, or over $1,500,000."


"And that’s how scammers are getting ahold of investor’s money."

PolyButterfly was great at marketing, and produced a great smart contract with a backdoor that allowed them to drain liquidity from all investors. After executing their new functionality, they then decided to disappear.


There did not appear to have been any resolution, so it would appear that investors are just out by the funds they participated with.


One of the key challenges with an open system is that anyone can join and start a project.


Having all of the funds stored in a liquidity pool which can be accessed by a single anonymous person is never a good idea.


Were the expectations of regulators reasonable, there would be no reason that any platform would ever need to launch outside the system.


Check Our Framework For Safe Secure Exchange Platforms

Sources And Further Reading

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