Controversial Web3 gambling protocol ZKasino still has not returned users’ Ether, more than two months after they launched a “signup” app for refunds, according to reports from users.
The project was previously accused of being an exit scam. But on May 28, the team promised to use a new app to return the funds that had been bridged to the network. But users claim the app simply took their ZKAS tokens and gave them nothing in return.
“Unfortunately, everyone who sent the ZKAS back has not heard anything from them yet,” one user, who communicated on the condition that his identity not be revealed, told Cointelegraph.
“I don’t believe they had or have any intention to actually return the ETH [...] It seems like they're just hoping that people who weren't victims will eventually forget about it.”
The user claimed that he deposited “equivalent to a year's salary — funds [he] had set aside for retirement,” which he now cannot retrieve. According to him, the team had previously given him “[t]he assurance that ETH would be returned[.]”
ZKasino states that it is a Web3 gambling project in development. According to its website, it is a “hyperchain rollup,” that is part of the ZkSync ecosystem of Ethereum layer 2 networks.
On the ZKasino blockchain explorer, the signup app contract is labeled “BridgeBackReceiver.” It is located at an address ending in “b6ec.” Blockchain data shows that thousands of ZKAS tokens have been deposited into the contract’s address since May 28.
On July 29, an account ending in “F72F” called the “recoverZKAS” function, transferring 26.6 million ZKAS tokens from the sign up app to itself. This function can only be called by a team member, which seems to imply that the team has taken possession of the deposited ZKAS. As of the time of publication, this is the last transaction the contract has performed.
In its May 28 announcement, the team stated that sign up data would be gathered “in the following days.” Once this data was gathered, a new announcement would be made “as soon as possible” and would include “data for public verification.” After this data was made public, the claim portal would be opened, and users would be able to retrieve their Ether (ETH) from the network.
More than two months have passed since this announcement, and the ETH remains in the development team’s multisig wallet.
Cointelegraph contacted the ZKasino team through their official Telegram admin account to discuss the user claims but did not receive a response by the time of publication.
ZKasino issues apology and refund statement
However, on Aug. 14, ZKasino published a statement saying it is “actively cooperating with relevant departments and providing the maximum possible compensation to all affected investors,” adding:
"we also have to admit that due to the massive loss of funds and the current financial situation of the platform, recovering the losses of all investors may face great challenges."
It noted that when it opened the refund process, many investors failed to complete the refund application within the stipulated time "due to the complex process and time constraints," adding it "deeply regret this and realize this did not meet your expectations."
Bridge to earn controversy
In an April 23 Medium post, blockchain investigator DKCrypto claimed that the team misled him and other users about its intentions. According to him, the ZKasino team launched a “bridge to earn” scheme on March 15. Users were told that they could bridge their ETH to the new ZKasino network and “earn a share of the 25% of $ZKAS token reserved to the community.”
This ETH was not an investment given in exchange for ZKAS, DKCrypto claimed. Instead, it was a reward given to users for simply bridging funds into the new network. He stated:
“This ‘Deposit to Earn’ scheme was supposed to end with the launch of the Zkasino mainnet 30 days after the opening of the bridge, when depositors were promised to receive their $ZKAS token, as well as all of their ‘bridged’/’deposited’ Ethereum back in their wallets.”
As evidence that the team promised to return all of users’ ETH, he cited an alleged recording of a ZKasino AMA in which one of the team members appears to state “when the bridge opens, you’ll get the ZKAS that you’ve earned and you’ll also get your ETH.” The recording was posted to X on April 20 by Web3 user “E.”
In his April post, DKCrypto claimed that he never received his funds back, despite being given assurances from the team the ETH deposited would be returned.
On April 22, the ZKasino team announced that they would not be allowing users to bridge their ETH back to mainnet. Instead, users would receive the network’s native coin, ZKAS, in exchange for the ETH they deposited.
“All bridged Ethereum has been converted to our native gas token, ZKAS, at a discounted rate of $0.055,” the announcement stated. “This conversion was done as a favour to our users who have bridged to participate in the ecosystem.”
Meanwhile, blockchain data showed that the team had transferred users’ ETH to the Lido staking platform, apparently in an attempt to earn a yield from the funds. The ETH was later moved back to its original location in the team’s multisignature wallet account.
The decision to not allow ETH withdrawals led to action from law enforcement. On May 3, Dutch authorities arrested a man for suspicion of “fraud, embezzlement and money laundering” and seized over $12 million in assets in connection with ZKasino. The police referred to the project as a “rug pull” or exit scam.
The police did not state the name of the man arrested, but DKCrypto claimed to have identified him as ZKasino co-founder Elham N., also known as Derivatives Monke on X. Cointelegraph could not independentlyconfirm the arrested man's identity.
Other alleged co-founders of the project include Ildar I. A., known as Prometheus on X and Lyor, known as Sigman.
On May 9, Derivatives Monke’s X account posted a statement that the project is not a scam and that “All ETH is safe and secured by ZKasino in the ZKasino Multisig[.]” The sign up app was launched approximately 19 days after this statement was made.
Concerns over potential exit scams or “rug pulls” are common as these are a frequent source of losses for crypto investors. On July 22, ETHTrustFund DAO withdrew $2 million from its treasury and deposited it into mixer apps in an apparent attempt to launder the funds, causing investors to lose everything they had deposited.
On June 8, Gemholic, a project that had previously stated that it would issue refunds to investors, transferred $3.3 million to Ethereum mainnet and deleted all of its social accounts, leaving investors with nothing.
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Update (August 14, 11:29 pm UTC): This article has been updated to include a public statement and apology from ZK
