Yield farm offering one million percent APY turns out to be a fraud
In early April, MaxAPY claimed it was transforming the decentralised finance sector with a yield farming protocol that aimed to offer holders the highest fixed and most sustainable APY. Instead it was a rug pull.
As a strategy, yield farming is not dissimilar to foreign currency carry trading where investors aim to lend currencies offering the highest returns and borrow those with the lowest interest rate.
Yield farming is typically done via stablecoins such as USDT, DAI and USDC, or protocols linked to the Ethereum blockchain. MaxAPY’s backers did not state which token they were using for their project.
DAI to US dollar (DAI/USD)
Farmers will typically move their crypto from one liquidity pool or loan platform to another in search of the maximum annual percentage yield or APY, which will often require flirting with riskier pools.
MaxAPY aimed to do this by using a ‘unique auto staking and auto compounding mechanism’ through which token holders would earn rebase rewards as interest payments directly into their wallet while their tokens increase every three seconds.
MaxAPY holders were told that they would receive an annual compound interest rate of 960,000% for Year 1 without having to move their tokens out of their wallets.
But despite the developers saying they had ensured the safety of investors by subjecting the entire team to full scale know-your-customer verification on both Cyberscope and Pinksale, within less than three weeks it was reported that the project had been rug pulled.
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Ethereum to US dollar (ETH/USD)
According to Grayson, head of business development at automated yield farming protocol Weave, inflated APY’s are a key sign of risk for potential yield farmers who aid that any project claiming returns of triple digits or higher was a potential risk.
The backers of MaxAPY said its returns were a function of an: “Auto-Stake feature is a simple yet cutting-edge feature called Buy-Stake-Hold-Earn that offers $MaxAPY holders the ultimate ease of use. By simply purchasing a $MaxAPY token and holding it in your wallet, you will receive rebase rewards as interest payments straight to your wallet as your tokens increase every 3 seconds.”
But instead of being based on cutting edge tokenomics MaxAPY simply recycled the millenia old tactic of using greed to defraud the unwary.
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