On October 4th, NFT marketplace Magic Eden announced that it has started processing refunds to wallets affected by the Degen Town drain.
The Refund Process
In a post made on its official Twitter account, Magic Eden announced that it would work with Solana DeFi & NFT analytics platform Hello Moon to investigate the incident and process the refunds.
As stated on the Magic Eden website, the company identified four leading scammer wallets through publicly available information as part of their investigation. Hello Moon compiled a list of wallets with a high likelihood of having had money taken out of them between July 9th, 2022, and four weeks later in August.
Based on the compiled information, the survey identified the exact amount of Solana (SOL) drained by scammer. By isolating an average NFT selling price, and the value of SPL tokens converted into SOL at the block time of the transfer, the company was able to calculate the required size of the refund.
Magic Eden commented that, due to the complexity of the transactions that took place in the wake of the hack, the refund process took a substantial amount of time to organize.
"The scammer transferred multiple items multiple times using different wallets and appeared to have used decoy wallets as well. We were careful to avoid refunding the scammer himself while also making sure we refund as many affected wallets as possible," explained Magic Eden.
We’ve started working with @HelloMoon_io to process refunds to wallets affected by the Degen Town wallet drain. Thanks for your patience on this matter.
— Magic Eden (@MagicEden) October 4, 2022
Degen Town Wallet Drain
‘Degen Town’ is an NFT collection featuring vibrantly colored, cel-shaded humanoids that was heavily promoted by Magic Eden on its launchpad minting service.
The Degen Town wallet drain incident took place in July 2022, when the project’s Twitter account was allegedly hacked, and users were duped into approving a contract on their account, which subsequently drained their wallets.
In the wake of the incident, Magic Eden tweeted:
"Originally, the project had promised to execute the refund. We offered a 3rd party for support. However, neither the original nor new Degen Town project owners have completed a refund."
Unfortunately, the project underwent a rug pull, forcing Magic Eden to acknowledge the incident in a blog post and Twitter thread on August 17th.
The Degen Town project had minted 8,000 NFTs at a cost of 3 SOL each, generating $923,000 in total value. Furthermore, creators received 7.5% from all subsequent sales as royalties.
/ We hear the community loud and clear about the @DegentownNFTs collection that launched on Launchpad and have been working behind the scenes to reach a resolution with the original founders and current collection owners.
Our full response: https://t.co/6AFI06cNsn
— Magic Eden (@MagicEden) August 18, 2022
On the Flipside
- This is not the first time Magic Eden’s identity verification process has been sidestepped, with the platform experiencing several high-profile rug pulls on its launchpad platform earlier in the year. NFT projects ‘King of Chess‘ and ‘Balloonsville‘ ultimately turned out to be scams, stealing more than $600,000 from investors, and exposing significant flaws in Magic Eden’s policies.
Why You Should Care
Magic Eden is the largest NFT marketplace on Solana by trading volume.
Find out more about Magic Eden’s new functionality aiming to protect royalties:
Magic Eden’s Attempt to Protect NFT Creators’ Royalties Gets Backlash from Community
Read more about worrying statistics from the NFT market:
NFT Trading Volume Has Crashed 97% from 2022 Highs