- Here’s a look at how a Solana-powered DeFi app inflated the total value locked by double counting.
- Full details on how Ian Macalinao and his brother drained an entire suspicious DeFi ecosystem behind Cashio.
During the summer 2021 bull market, decentralized finance (DeFi) application Sunny launched on the Solana blockchain network, with its native token immediately skyrocketing. Within two weeks of launch, billions of dollars were already pouring into this yield farm.
However, questions remained about the pseudonymous developer of DeFi app Sunny “Surya Khosla”. According to CoinDesk’s investigation, Ian Macalinao, the chief architect of Solana-based stablecoin Saber, was the real person behind the pseudonymous identity. He had built the Sunny Aggregator DeFi app on Saber.
20-year-old Ian Macalinao worked as the sole brain behind 11 supposedly independent developers. In addition, he created a large web of DeFi protocols to project billions of dollars of double counted value flowing into the Saber ecosystem.
This literally inflated the Total Value Locked (TVL) on the Solana blockchain network. TVL serves as an important barometer for plotting on-chain activity in the DeFi space. In a never-published purported blog post dated March 26, Ian wrote:
I devised a scheme to maximize Solana’s TVL: I would create logs that would be stacked on top of each other, allowing a dollar to be counted multiple times.
CoinDesk has verified the authenticity of the blog post from people familiar with the matter. Ian’s ploy worked for a time, too, with Sunny and Saber alone contributing 75 percent of Solana’s $10.5 billion TVL at its peak. During this time, Sollana’s native crypto SOL traded at $188. “I believe it contributed to SOL’s dramatic rise,” Ian wrote.
How did Ian manage that?
Though Ian thought TVL was a vanity metric, he said it always bothered him why Ethereum’s TVL was so high. He believed that DeFi projects on Ethereum are “stacked” with double-counted deposits. Ian wrote: “I wanted to create a system very similar to this one. If the same team created every log, TVL as a metric would be sillier. So I created more anonymous profiles.”
In the unpublished blog post, Ian wrote that he and his developer brother enlisted the help of several friends. Her own coder club called Ship Capital laid down the “blueprints for my ideal DeFi ecosystem.” On the other hand, Saber and its liquidity provider tokens anchored everything. In his blog post, Ian wrote:
When an ecosystem is built by just a few people, it doesn’t look as authentic. I wanted to make it look like a lot of people were building on our protocol instead of sending 20+ disjoint dates[ed]programs as a person.
Ian and Dylan Macalinaos wanted other protocols to become so dependent on Saber that “failing them would cause the entire system to fail.”
Hidden behind his pseudonymous identity, Ian and his Anons performed something akin to a “Sybil Attack”. This is a type of attack in which a computer uses false identities to gain disproportionate influence. “I’m revealing this because it’s inevitable that I’ll be found out,” Ian wrote.
Ian’s army of anons
As the CoinDesk investigation explains, Ian appeared on Twitter in August 2021 using his pseudonymous identity as Surya Khosla. Known as Saint Eclectic, the cryptocurrency user said he was reluctant to wager his money.
However, Ian’s (Surya Khosla) reputation building efforts turned in his favor. In September, Ian’s brother Dylan Macalinao tweeted that he knew Surya pretty well in real life. He also tweeted that he felt comfortable putting his own money into the Sunny Aggregator. dylan wrote:
Chatted with the team and we reviewed their code. Obviously still risks like any DeFi project, but I feel comfortable putting my own crypto into their project.
Dylan lent credibility to Surya Khosla, who did not exist, to convince skeptics. In early March 2022, Ian said he had created 11 “anonymous founders who are actually me”. As CoinDesk explains:
Ship Capital had many “friends”: 0xGhostchain, who founded Cashio; Goki Rajesh, builder of multi-signature wallet Goki; Larry Jarry of mining rewards aggregator Quarry; Swaglioni, the “grandmaster” of the TribecaDAO governance platform; and of course Surya Khosla from Sunny Aggregator, Saber’s Yield Farm.
These DeFi players served as jewels of the Saber ecosystem. Ian himself has admitted to creating this whole lot. Ian, Dylan and their army of anons have been heavily promoting Ship Capital’s work on social media.
Aside from acknowledging one another in public, Ian and Dylan have literally ratted out their peers’ launches and integrations. Later on December 7, 2021, Ian tweeted: “Team size =! Success. I would immediately pay @larrinator01 and @0xGoki 10 times the market price. Not that they need my husband.”
It’s pretty much impossible to know how Ian managed to figure out his team’s identities from Anons. In his unpublished blog post, Ian admitted to pulling the strings when it mattered most. “As a developer, it’s very easy to find out what open-source protocols I’ve written: there’s always a ‘flake.nix’ file that only I use,” he wrote.
A better understanding of Ian’s actions
To understand how Ian’s “army of anons” pumped the double counted value into Saber, let’s take a look at 0xGhostchain’s Cashio project. During the crypto market peak in November 2021, Cashio unveiled its “decentralized stablecoin” CASH, whose dollar-pegged cryptocurrencies were paired through “liquidity provider” tokens.
LPs are nothing more than a type of crypto asset that are used by holders to generate additional income. Interestingly, Cashio only accepted LP tokens from Saber in the form of collateral. In November, Saber was functioning as an “automated market maker” with over $1 billion in total locked up. It also served as a major DeFi trading venue for stablecoin pairs on Solana.
To generate income, Cashio relied on Saber ecosystem projects created by Ian and his dummy teams. As CoinDesk explains:
It initially packaged Saber LP tokens into “tokenized baskets” with Crate, which Ian created under the alias “kiwipepper”. It sent these “boxes” through a yield redirection platform called Arrow – Ian built these as “oliver_code”.
Finally, Cashio said it earned returns by staking these portfolio derivatives in “Surya’s” Sunny Aggregator and Quarry, which Ian built as “Larry Jarry.” Profits flowed into Cashio’s treasury, which is managed by a decentralized autonomous organization (DAO).
Cashio accepting the Saber LP tokens in exchange for the CASH tokens was a lucrative trade for many users. This is because CASH holders could deposit their LP-backed stablecoins into Sunny liquidity pools and earn 10-30% returns on them.
Had they deposited the Saber LP tokens in Sunny instead, they would have only earned 5-10% returns. According to the CoinDesk report, users only rammed deposits from Saber-to-Cashio-to-Crate-to-Arrow-to-Sunny-or-Quarry. According to Ian, this process turned $1 of the total value into $6. “TVL can only count if logs are made separately,” he said as a reason why all of those logs appear to be made separately.
In mid-September, Saber’s deposits peaked at $4.15 billion. Similarly, the total value of Sunny’s aggregator app is $3.4 billion. During this time, the two native tokens SBR and SUNNY traded at their all-time highs. Since then, however, both tokens have collapsed by more than 95%.
Massive investor losses
The early March 2022 Cashipo implosion resulted in a loss of $52 million in investor funds. In his unpublished blog, Ian apologized for the “catastrophic” loss and said he was “very pushy for people to invest more in Cashio”. He also asked the hacker to “consider returning the funds.” However, the hacker released $14 million at the request of the hacked victims.
Ian also wrote that if the hacker doesn’t pay back in full, “I will do everything I can to pay back affected personal users in my personal Saber and Sunny tokens. That won’t cover the full amount, but it’s all I have to offer.”
Learn Crypto Trading, Yield Farms, Income strategies and more at CrytoAnswers
https://nov.link/cryptoanswers
Comments are closed.