Gemholic Vanishes After Withdrawing $3.5 Million in Locked ETH

The crypto community is raising alarms over a potential $3.5 million rug pull by Gemholic, a project on zkSync. On June 7, multiple transactions drained the project’s smart contract funds.

Concerned members on social media platform X (formerly Twitter) highlighted that Gemholic’s online presence has vanished. The project’s X handle and Telegram channel have been deleted as of press time.

How Did The Gemholic’s Rugpull Occur?

Last year, Gemholic lost access to 921 ETH raised in a token sale due to a bug in its smart contract. At the time, the team promised to refund investors if the locked funds were recovered.

On June 7, the Matter Labs-backed Ethereum layer-2 network zkSync completed its v24 upgrade. The update fixed the smart contract issue, allowing access to Gemholic’s locked funds. However, according to on-chain data, instead of returning the funds to investors, the Gemholic team withdrew 921 ETH and transferred it to the Ethereum blockchain.

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0xMorgosh, the pseudonymous founder of Zkmarkets, called this action a “rugpull,” accusing Gemholic of deceiving investors for a year with false refund promises. He pointed out that the Gemholic team had completed Know Your Customer (KYC) verification with SolidProof, which has not publicly addressed the situation.

“A KYC provider must either admit its incompetence in conducting thorough verifications, or take action in reporting fraudsters to authorities and making a public statement. If SolidProof continues to ignore this issue, then their platform is useless and should be discredited,” he added.

0xMorgosh also noted that Binance supposedly funded the contract creator’s address and urged the community to share insights on how the exchange might assist.

Read more: What is ZKSync?

Meanwhile, this incident is reminiscent of a similar case involving ZKasino, another ZK stack-powered platform. ZKasino reneged on its promise to return users’ bridged Ethereum, sparking stiff resistance from the crypto community. The project would later backtrack from its fraudulent activities after Dutch authorities made arrests and began investigations into the matter.