An anonymous mastermind created 21,877 Sybil wallets, developed a decentralized exchange, and created a token called Gemstone ($GEM) to fake on-chain activity.
The abnormal activity was first identified by DeFi analyst @lingland09 on Twitter. “The individual funded all of his wallets with very small amounts of ether, then he deployed Gemstone ( $GEM ) token that wasn’t open source,” he writes in the Twitter thread.
In the next move, he developed a decentralized exchange to generate fake transaction history using all Sybil wallets and dex. Afterward, he inflated the $GEM token’s value by adding liquidity of 80+ ETH in his DEX smart contract.
After injecting liquidity, he swapped $GEM tokens that he claimed from 21877 wallets at gem/eth pair and gained 0.6- 0.7 eth value of profit. Also, he repeated the same trick many times to smartly avoid negative slippage with the cheapest transactions on Zksync Era.
The analyst says, “he did all this 10.000 USD volume and 10 transactions by spending 1.5 – 2 USD worth of ETH fee per wallet.”
Also, he did not perform this trick manually; instead, he used trading bots to automate the action.
Furthermore, he tried to replicate the transaction history of other layer 2 projects by making transactions at different months, weeks, and days.
While the motive behind this fake DeFi activity is unclear, some intellectuals affirm that the person was attempting a fake airdrop on the zkSync Era network.
Sybil activity in decentralized finance (DeFi) refers to a type of malicious behavior where an individual or entity creates multiple fake or pseudonymous wallets to manipulate or disrupt DeFi platforms and protocols.
