Latest developments
In April of this year, the decentralized betting platform ZKasino in the ZK ecosystem fell into a 'runaway' storm: tampering with website activity descriptions, refusing to refund users' ETH from staking activities, closing Telegram speaking permissions, canceling offline meetings in Dubai, and unilaterally transferring user funds to Lido for staking... Many users suspect that ZKasino has already 'soft rug.' On May 28, ZKasino officially responded that they have initiated a two-step bridging refund process, allowing bridge participants to register and bridge back their ETH at a 1:1 ratio. They will collect registration data over the next few days and release a new announcement as soon as possible, providing data for public verification.
However, by August 14, the previously 'runaway' decentralized entertainment platform ZKasino still had not issued refunds, and the funds raised by investors remained in the original two addresses.
On November 23, according to on-chain data analyst Yu Jin's monitoring, ZKasino addresses began to misappropriate 'funds prepared to be refunded to users' for leveraged long positions on-chain. They deposited 5,270 ETH into Aave as collateral to borrow 11.589 million DAI and subsequently increased their positions by 3,500 ETH.
On November 28, the ZKasino project party continued to lend out 9.36 million DAI to purchase 2,603 ETH. After depositing 10,535 ETH from users into Aave as collateral, they had borrowed a total of 53.77 million DAI to purchase 15,645 ETH for leveraged long positions. This portion of leveraged ETH was purchased at an average price of $3,437. With the significant rise in ETH, the ZKasino project party has made a floating profit of $3.22 million by misappropriating users' ETH as collateral for leveraged long positions. According to on-chain data, ZKasino is not 'unable to repay,' but openly chooses to 'profit from user assets.' Every step taken by ZKasino extracts users' trust and assets, which completely deviates from the original intention of decentralization and transparency. The ZKasino project party profits from users' funds in high-risk operations while ignoring the issue of returning users' funds, which undoubtedly causes secondary harm to the victims.
The ZKasino Incident Timeline
Back on April 19, multiple community users discovered that after the ZKasino staking activity ended, the ETH refunds were not opened for a long time. Subsequently, through Wayback Machine, it was traced back that on April 18, ZKasino deleted the statement 'Ethereum will be refunded and can be bridged back' from the Bridge funds page on their official website, causing panic among users, questioning whether they were scheming to 'take the money and run.' Participants in the staking activity flooded ZKasino's official Twitter to inquire, and Telegram also became a platform for rights protection. However, soon after, the ZKasino team members closed the Telegram speaking permissions.
On April 20, the MEXC trading platform, which was originally scheduled to launch ZKasino (ZKAS) that day, issued a notice stating that the launch and withdrawal have been postponed, and ZKAS deposits have also been temporarily suspended. MEXC staff responded to the allegations of ZKasino 'running away' by saying, 'We are just one of the investors; the project party's actions have nothing to do with us. As investors, we are also victims.'
Perhaps due to multiple pressures, ZKasino finally issued a brief response: there are currently many FUD rumors. The ZKasino network will continue to be online, and the (mainnet) launch was delayed due to exchange listings.
However, users do not accept this simple response, and the main conflicts now are 'When will refunds occur?', 'Is there a soft exit?', 'Why has the mainnet refund description been changed?'.
On April 21, according to on-chain analyst Yu Jin's monitoring, ZKasino transferred 10,515 ETH deposited by users to a multi-signature address, subsequently deposited into Lido. These ETH were mined by users depositing into ZKasino, but the ZKasino team modified the official website's description, forcibly converting users' deposited ETH into their platform tokens.
On April 22, Big Brain Holdings, previously disclosed as one of ZKasino's investment institutions, issued a statement 'refuting rumors,' denying any involvement in ZKasino's financing.
As of now, users' concerns seem to be getting increasingly 'validated.' Some users discovered that as early as March 16, Kedar, the founder of the Ethereum Layer 2 DEX project ZigZag, had warned that there might be issues with ZKasino. In Kedar's tweet, he mentioned that most of ZKasino's income was fabricated, and users should be cautious about participating in their ICO activities.
Currently, the latest tweet from ZKasino only announces the next step for the project: 'All ZKasino games will be moved to a new chain - and will still remain on Arbitrum and Polygon. The native DEX and stablecoin will be launched soon. The first batch of ZKAS has been distributed to bridge participants.'
However, there were no congratulations or celebrations in the replies to the tweet, only users repeatedly asking: 'When will refunds happen?'
Crypto VC and KOL's opinions and suggestions
As a 'star' project on ZK, many KOLs participated and recommended this project in its early stages. Now that such negative events have occurred, these KOLs have naturally become the target of criticism. In the crypto field, how to avoid pitfalls, and who should be responsible when problems arise in the project? Du Jun from ABCDE Capital, crypto KOL 0xSatoshis, and @0xkillthewolf expressed their views, summarized by Rhythm BlockBeats as follows:
ABCDE Co-Founder Du Jun (@DujunX):
Regarding the project party's exit scam, I see everyone blaming investment institutions and KOLs. I think while there's a point, it also seems a bit absurd.
In the crypto field, 95% of investment institutions are actually disadvantaged groups, flattering project parties for quotas, flattering platforms for listings, flattering LPs for money, essentially just sycophants.
Good projects have nothing to do with these institutions in the early rounds, let alone conducting due diligence on the project team. If they can send money to the address, it's already a blessing. KOLs seem powerful, and some projects even have KOL rounds, but they are actually at the bottom of the food chain with no voice. If KOLs do not receive money to promote, it is difficult to hold them accountable legally, leaving only moral condemnation. Looking around, only top exchanges are at the top of the food chain; other roles are just there to provide casual support.
When the project party runs away, everyone finds investment institutions and KOLs to protect their rights. Institutions and KOLs also invested real money; who should they seek to protect their rights? In this jungle society of Crypto, we must pay for our own investment results. Continuous learning is the only way to earn more and live longer.
Finally, I strongly condemn the project parties that run away and the KOLs who promote these runaway projects, hoping that unscrupulous projects will face legal sanctions and return coins soon, and that everyone’s wallets remain safe.
Crypto art creator Niq (@niqislucky) replied:
Admit it: the vast majority of staking projects are like sending money to a 'multi-signature address.' Unless the team is well-known, otherwise VC brand endorsement is almost the entire trust basis for retail investors. KOLs? Responsible for spreading information, and even taking the blame.
There is weakness only when comparing among VCs. When the gods gather, if you can't get in, you're just a beginner. No matter how inexperienced, retail investors are still completely crushed by information/funding. Not on the same level, who can empathize with whom? Retail investors only feel like they are crying crocodile tears...
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Crypto KOL 0xSatoshis (@0xSatoshis):
Given the soft exit status of Zkasino, I have reviewed all staking projects today, excluding ATOM+OSMO+TIA+DYM staking.
Currently, the projects participating in staking are:
1) swell + eigenlayer + renzo + puffer (total within 20E)
2) blast initial investment of 25E, now only 6E remains, significant inflation of points.
3) lista over 5000 U
4) merlin only staked Runestone
5) bouncebit less than 10,000 U
In the future, I will periodically withdraw capital or reduce positions to reasonable levels (the so-called reasonableness is to accept a total loss). I feel that the current risk of staking in nested projects is very high; if I stake one dollar in projects A, B, C, D, and E, the total value locked becomes five dollars, but the market is still only one dollar. If something goes wrong in the middle, or if there is a hacker attack, the risks are continuous. It’s better to exit part of the capital while there is still liquidity.
I want to emphasize again, do not trust KOLs' promotions, including this little leek of mine. Seriously study the content they share; as for whether to invest in the end, it must be decided by yourself. Investing is our own business, and KOLs provide us with content and information that assist our decision-making.
For beginners, it's advisable to participate less in staking projects; capital is the priority. Veteran investors should control their positions and aim for high returns at low costs.
Brothers, you can earn less, but you can't lose everything. Staking should control positions, and I don't recommend using off-exchange leverage to stake. In web3, nothing is impossible. Don't always think that problems won't occur. Many people, including myself, thought the same about FTX. When the avalanche occurs, no snowflake is innocent. So prepare your own risk control in advance and be responsible for your own wealth.
Finally: All the projects I participated in this article are just my own review, not investment advice, and I am currently reducing my holdings. Everyone please make your own judgments, DYOR!
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Crypto KOL killthewolf.eth (@0xkillthewolf):
The ZKasino incident is currently very heated. Although I did not invest or participate in staking in this project, a total of 4 people have asked me whether to invest in this KOL round. I will write down my thoughts and insights here, hoping to help everyone filter projects in the future.
The KOL round is valued at 9 million USD, with 15% unlocked at TGE. At first glance, this seems like a no-brainer, as the institutional valuation is 350 million USD, making it 40 times cheaper than institutions. As for the 15% unlock at TGE, I only need 60 million USD FDV at the opening to break even, and institutions have already provided a valuation of 350 million USD.
The main reasons I ultimately did not participate are:
First, why is it valued at 350 million? The recently listed Ethena on Binance is valued at 300 million, Puffer Finance at 200 million, so why can ZKasino, a gambling platform, be valued at 350 million? Because of this valuation figure, I have doubts about this round of financing.
Second, the project party claims a revenue of 8 million. Although everyone assumes this number has some exaggeration, I still checked the addresses of the top 20 users on the platform. They are all suspected project party accounts inflating the numbers.
Third, the founder's character is very questionable. Previously, their official account jokingly used a bloody video of a murder case for marketing, which stirred quite a controversy. @zachxbt has also exposed various things this person has done: https://x.com/zachxbt/status/1731025316204745113
From my perspective, the valuation of this project is fake, the revenue is fake, the character is bad, and there is no conscience, so in the end, I did not participate and fortunately avoided a big pit.
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