ZKasino’s Controversial Move Angers Investors
DeFi investors are expressing outrage after the gambling platform ZKasino redirected $33 million of user funds to Lido Finance instead of returning them. This decision followed the platform’s earlier action to swap user deposits to its native token, ZKAS, without consent, claiming it was a “favor” to users. This action has led to accusations of a “rug pull” as the funds were staked in Lido through a multisig wallet controlled by ZKasino’s team.
Troubled Launch and Investor Reaction
Upon its launch on April 20, ZKasino shocked its users, many of whom had participated in a “bridge-to-earn” campaign that gathered 10,515 ETH. After the launch, a blog post revealed their ETH had been converted to ZKAS with a 15-month lockup, causing a significant uproar. Blockchain analysts later discovered the funds were sent to Lido Finance for staking, deepening investor concerns.
Breakdown of Communication Channels
Communication issues compounded the situation when ZKasino’s team temporarily locked its Telegram group, citing the absence of a moderator. The situation escalated as a team member claimed the group was permanently shut down because of threats to the team, including allegations of hiring hitmen.
Misleading Technology Claims Exposed
Further investigation revealed that ZKasino falsely claimed to utilize zero-knowledge technologies like zkSync and EigenDA. Instead, it operated on an Arbitrum Nitro chain, which was criticized for being hastily deployed with minimal effort, highlighting the deceptive practices of the platform.
Background of Founders Raises Red Flags
Prominent blockchain detective ZachXBT had previously warned about the dubious history of ZKasino’s founders, pointing out their history of unpaid debts and questionable activities. These warnings were seemingly ignored as ZKasino managed to secure significant funding despite these red flags.
Funding and Investor Stance
In March, ZKasino announced a substantial $26 million Series A funding, but as the project’s credibility faltered, some investors began distancing themselves from the initiative. Notably, firms like Big Brain VC clarified their past and present investment stance, expressing regret and caution about their association with ZKasino’s founders.
The ZKasino debacle has left many investors in limbo, awaiting the fate of their staked ETH. The platform’s actions, combined with misleading claims and a troubled founder history, have sparked a significant controversy in the DeFi community. Investors and regulatory bodies alike are keenly watching the unfolding events, hoping for a resolution to the alarming situation.
