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xKingdom Project on Arbitrum Collapses, Allegedly Stealing $1M in Ethereum

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xKingdom Project Ethereum Theft

The Arbitrum network-based project xKingdom suddenly ceased operations last week, leaving investors in the lurch. According to reports, the development team allegedly stole funds from users and absconded with the money. It was reported that xKingdom’s official Twitter account and website suddenly went offline without prior notice or communication to users. This raised red flags within the cryptocurrency community about the viability of the project. A closer look found that the entire team behind xKingdom had removed all online presence.

Their social media handles and communication channels disappeared overnight. An investigation revealed that the team had emptied user funds invested in the project. It is believed they converted the staked Ethereum worth approximately 552 ETH to the stablecoin Tether and secretly transferred it over to the Ethereum mainnet. This illegal transaction is estimated to have made the scammers a profit of around $1.02 million.

Funds shuffled using privacy tools

xKingdom Project Ethereum Theft

Currently, the misappropriated funds are traced to being stored at the Ethereum address 0xCA…74c6. In an attempt to hide the money trail and avoid detection, the address reportedly used the privacy-focused cryptocurrency mixing service Tornado Cash. This step helped shuffle the transactions and made the funds harder to track on the blockchain.

Cybers, a leading blockchain security firm, confirmed seeing signs of a “rug pull” operation on xKingdom after analyzing on-chain activities. They noticed all the staked funds being withdrawn from the project’s smart contracts and redirected out of the Arbitrum network.

Recovery efforts and lessons

xKingdom Project Ethereum Theft

While the perpetrators behind the xKingdom scam managed to vanish along with users’ money, experts believe some amounts may still be recoverable. It is thought that portions of the illegally obtained funds could have ended up at central cryptocurrency exchanges via the Ethereum address. Recovery teams are looking into freezing any such holdings.

This incident highlights the risks involved for investors in highly speculative blockchain startups and decentralized finance (DeFi) projects. Going forward, more due diligence must be done on new project teams before trusting them with funds. Stronger technical, legal, and community safeguards must also be established to prevent such cyberheists on cryptocurrency networks.

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