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September 5th, 2020 8am PST; Victor Fang, AnChain.AI

At 5:00 am PST, 9/5/2020, the red hot DEX SushiSwap’s founder, Chef Nomi, suddenly “migrated” 5 million Sushitoken and pocketed 17,971 ETH ($6.3 million). Immediately the Sushitoken price crashed by half to $2, vaporizing $130 million market cap. DeFi investors are anxiously and rightly wondering: is SushiSwap another exit scam?

Fig 1 : 5 Million Sushi tokens large volume transactions detected by AnChain.AI CISO. Left center is Chef Nomi’s developer team’s wallet.
Fig 2: Etherscan transaction.

Etherscan transaction:

SushiSwap is a “copycat” Uniswap DEX and AMM that launched recently. Sushiswap introduced itself as an evolution of Uniswap with the addition of Sushitoken dividend payout tokenomics, a fundamental departure from the authentic Uniswap LP (Liquidity Provider) profit sharing economics.

In essence, Sushiswap acted as a “vampire” that hard forked from the Uniswap LP pool and sucked up the billion dollar liquidity pool, injecting Sushitoken’s own tokenomics which then circulated through centralized exchanges such as Binance, FTX and more. Sushi tokenomics appeared more attractive for entry level investors, who swarmed to the opportunity to simply purchase Sushitokens and earn dividend payouts.

Regarding SushiSwap, Hayden Adams, the founder of Uniswap based in New York, tweeted a few days ago claiming “Sushi is one day’s effort by any competent dev” , and “it’s just whales playing whale games”.

Fig 3: Uniswap’s founder Hayden Adams’ tweet on Sushiswap.

SushiSwap has opened itself to a variety of security audits, receiving passing grades from firms like Peckshield and Quantstamp albeit not without flaws. Even prior to this, however, its tokens had already entered circulation in Binance, FTX and other centralized exchanges. With Chef Nomi’s sudden cashout a few hours ago, however, it seems like Hayden Adams may have been right.

The DeFi market has been red-hot through 2020. San Francisco based cybersecurity firm AnChain.AI urges that DeFi governance is becoming more critical than ever, and it should be considered as an organic extension of smart contract auditing. Lack of DeFi governance will paralyze not only DeFi itself, but also the investors and community. In AnChain.AI’s recent DeFi smart contract audits, we have rigorously reviewed governance business logics and highlighted potential risk exposure.

AnChain.AI also urges all investors to review the DeFI audit report conducted by professional cybersecurity teams, and manage risk exposure accordingly.