ParaSpace Team Alleges CEO Embezzled $1.7M
NFT Lending Protocol Loses A Third Of Deposits
By: Owen Fernau •NFT News
As the NFT market downturn drags on, one of the space’s major lending protocols has been engulfed in scandal.
Users of ParaSpace, a collateralized lending protocol, withdrew over $36M worth of NFTs on May 10 as allegations of embezzlement against the project's CEO came to light. It still has over $80M in NFT deposits.
Yubo Ruan, whose LinkedIn page lists him as ParaSpace’s founder, didn’t fully return 2,909 ETH that belonged to the project’s users, a post in the ParaSpace Discord alleges. The funds came from security firm BlockSec, which prevented an attack on the lending protocol by preemptively carrying it out itself in March.
The recovered ETH was sent to a ParaSpace wallet allegedly controlled by Ruan. A document from the ParaSpace team accuses Ruan of misappropriating nearly half the assets, along with the relevant blockchain transactions.
The incident highlights a dynamic often seen in the crypto space where control over different components of a project is spread out among team members. These could include social media accounts, websites, and crypto wallets. When disputes arise, discrepancies between the actions of the different units tend to emerge.
The ParaSpace team alleges that Ruan has distributed funds from that wallet to other unknown addresses, centralized exchanges, and Circle, the issuer of the USDC stablecoin. The team further said, and provided a transaction as proof, that Ruan is supplying ETH to ParaSpace to earn interest from the very users who are owed the ETH.
Ruan, who didn’t respond to The Defiant’s requests for comment on Twitter, has countered on the social media site, saying that he has followed a scheduled disbursement of the funds. “I have nothing to hide,” Ruan posted.
Ruan claims that the Twitter account of the lending protocol has been coopted by Thomas Schmidt and Jay Yao, both senior members of the ParaSpace team. Schmidt and Yao are among the team members listed in the Discord post laying out the allegations against Ruan.
ParaSpace’s website has a banner redirecting visitors to Ruan’s Twitter account, claiming that the project is under a ‘social engineering attack.’
With users withdrawing NFTs en masse from the protocol, it’s clear that people are uncertain about the project’s status. The Paraswap Twitter account emphasized that “all user funds and assets are safe and cannot be accessed by Yubo.”
On a bittersweet note, the project hit an all-time high of daily active users at 1,501 on May 10 as people withdrew their assets from the platform amid the turmoil.