LeetSwap DEX Pauses Trading on Base Due to Potential Exploit

LeetSwap, the leading decentralized exchange by trading volume and liquidity on Base, an Ethereum layer-2 solution by Coinbase, paused trading on its platform due to potential exploitation of the platform’s liquidity pools.

The decentralized exchange’s team said in a tweet this morning that some liquidity pools on the DEX “might have been compromised” and trading will remain paused as they “investigate” the issue.

The team said in a follow-up tweet that they’re trying to “find a way to recover the locked liquidity.”

The platform lets users lock their liquidity-provider tokens, essentially receipt tokens for contributing liquidity to a DEX, in exchange for LEET token rewards.

One user of LeetSwap wrote in their Discord that their locked liquidity in the Axelar Wrapped USDC (axlUSDC) and Ethereum (ETH) pool had “disappeared” overnight.

The team added that withdrawals of assets that were not locked in the pools were open while trading remains paused.

LeetSwap had $41.2 million in deposits on Monday, per DeFiLlama data, as meme coin hype took off on Base.

A meme coin is a category of cryptocurrency tokens that has no specific utility but gains popularity and value primarily due to its association with an internet meme, joke, or viral content.

Its liquidity has since plummeted following a massive rug pull scam involving BALD tokens and the trading pause this morning. Currently, the DEX holds deposits worth $7.17 million.

A rug pull is a developer scam where an entity that created a decentralized application or token suddenly shuts down or disappears, taking investor assets with them.

Meme coin frenzy on Base

Coinbase’s layer-2 platform opened the network for developers on July 13, which followed a flurry of meme coin launches.

Currently, there are 100 meme coins listed on LeetSwap, per DEX Screener data.

On Sunday, LeetSwap recorded $200 million in trading volume for meme coins, among which BALD token accounted for more than half of the trading interest.

The meme token possibly refers to Coinbase CEO Brian Armstrong’s shaved head. BALD’s price surged more than 3000% within a day of its launch on July 30.

However, at its peak market capitalization of around $28.1 million, the token’s developer on LeetSwap withdrew $25.6 million worth of liquidity, causing the token to plummet more than 92% within minutes.

Blockchain sleuths suspect the involvement of FTX’s infamous founder Sam Bankam-Fried in the BALD rug pull.