Latest developments
In April this year, ZKasino, a decentralized betting platform in the ZK ecosystem, was mired in a 'runaway' storm: altering the website's activity description, refusing to refund users' staked ETH, closing Telegram speaking permissions, canceling offline meetings in Dubai, and unilaterally transferring user funds to Lido for staking... Many users suspected that ZKasino had already 'soft rug'. On May 28, ZKasino officially responded that they had initiated a two-step bridging refund process, and bridge users could register to bridge back their ETH at a 1:1 ratio. They would collect registration data in the coming days and release a new announcement as soon as possible to provide data for public verification.
However, by August 14, the previously 'runaway' decentralized entertainment platform ZKasino still had not issued refunds, and the funds raised from investors remained in the original two addresses.
On November 23, according to on-chain data analyst Yu Jin's monitoring, the ZKasino address began to misappropriate 'funds prepared to be refunded to users' to go long on ETH using leverage on-chain. They deposited 5,270 ETH into Aave as collateral to borrow 11.589 million DAI, and then increased their position by 3,500 ETH.
On November 28, the ZKasino project team continued to borrow 9.36 million DAI to purchase 2,603 ETH. They deposited 10,535 ETH from users into Aave as margin and have cumulatively borrowed 53.77 million DAI to buy 15,645 ETH to leverage long on ETH. The average price of ETH purchased through leverage is $3,437. With the significant rise in ETH, the ZKasino project team misappropriating users' ETH as margin for leveraged long positions has currently yielded a floating profit of $3.22 million. From on-chain data, ZKasino is not 'unable to repay', but has openly chosen to 'profit from users' assets'. Every action taken by ZKasino is extracting user trust and assets, which completely deviates from the principles of decentralization and transparency. The ZKasino project team is using users' funds in high-risk operations to earn floating profits while ignoring the issue of returning user funds, which undoubtedly constitutes a second harm to the victims.
The ZKasino incident timeline
Back to April 19, several community users discovered that after the ZKasino staking event ended, ETH refunds were not opened for a long time. Subsequently, through Wayback Machine tracing, ZKasino deleted the sentence 'Ethereum will be refunded and can be bridged back' from the Bridge funds page on their official website on April 18, causing panic among users and questioning whether they were plotting to 'run away with the money'. Users who participated in the staking event flocked to ZKasino's official Twitter to inquire, and Telegram also became a platform for rights protection. However, shortly thereafter, ZKasino team members closed the speaking permissions on Telegram.
On April 20, the MEXC trading platform, which originally planned to launch ZKasino (ZKAS) on that day, announced the postponement of the launch and withdrawal. ZKAS deposits have also been temporarily halted. MEXC staff responded to ZKasino's 'runaway' allegations, stating, 'We are just one of the investors; the project team's actions have nothing to do with us. As investors, we are also victims.'
Perhaps due to pressure from multiple parties, ZKasino finally issued a brief response: 'There are currently many FUD rumors. The ZKasino network will continue to run; previously, the mainnet was delayed due to the listing on exchanges.'
However, users do not buy into this simple response. 'When will refunds be issued?', 'Is it a soft rug?', 'Why was the mainnet refund description changed?' have become the main conflicts.
On April 21, according to on-chain analyst Yu Jin's monitoring, ZKasino transferred the 10,515 ETH that users bridged into ZKasino to a multi-signature address, which was later deposited into Lido. These ETH were bridged by users into ZKasino for mining, but the ZKasino project team modified the official website description, forcibly swapping users' deposited ETH for their platform tokens.
On April 22, Big Brain Holdings, previously disclosed as one of ZKasino's investment institutions, published a statement denying involvement in ZKasino's financing.
At this point, users' concerns seem to be gradually 'validating'. Some users also discovered that as early as March 16, Kedar, the founder of the Ethereum Layer 2 DEX project ZigZag, had warned that ZKasino seemed to have problems. In Kedar's tweet, he mentioned that most of ZKasino's income was fabricated, and users should be cautious in participating in their ICO activities.
Currently, ZKasino's latest tweet only announced the next steps for the project: 'All ZKasino games will be moved to a new chain - and will still be retained on Arbitrum and Polygon. The native DEX and stablecoin will be launched soon. The first batch of ZKAS has been distributed to bridge users.'
However, in the replies to the tweet, there were no congratulations or celebrations, only users repeatedly asking, 'When will refunds be issued?'
Views and suggestions from crypto VCs and KOLs
As a 'star' project in ZK, many KOLs participated and recommended this project during its early launch phase. 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 when a project has issues, who should be held accountable? Du Jun, co-founder of ABCDE Capital, crypto KOL 0x Satoshis, @0x killthewolf, and others have expressed their views, organized by Rhythm BlockBeats as follows:
ABCDE Co-founder Du Jun (@DujunX):
Regarding the project team running away, I see everyone holding investment institutions and KOLs accountable; I think while it makes sense, it's also somewhat absurd.
In the crypto field, 95% of investment institutions are actually weak, groveling to project parties for quotas, flattering platforms for listings, and flattering LPs for funds, truly a pack of sycophants.
In the case of good projects, the earlier rounds had nothing to do with these institutions, let alone conducting due diligence on the project team. Being able to transfer money to the address is already a matter of gratitude. KOLs may seem powerful, and some projects even have KOL rounds, but they are equally at the bottom of the food chain with no voice. If KOLs are not paid to promote, it is very difficult to hold them accountable legally; they can only be morally condemned. Looking around, only leading exchanges are at the top of the food chain; other roles are just incidental.
When the project team runs away, everyone looks for investment institutions and KOLs for rights protection. Institutions and KOLs have also put real money into the projects, so who should they turn to for rights protection? In this jungle-like society of crypto, we must bear the consequences of our investment results and continuously learn to earn more and live longer.
Finally, I strongly condemn the project team that ran away and the KOLs who promoted these runaway projects. I hope that unscrupulous projects receive legal sanctions and that funds are returned as soon as possible, so that everyone's wallets remain safe.
Crypto artist Niq (@niqislucky) replied:
Admit it: The vast majority of staking projects are like putting money into a 'multi-signature address'. Unless the team is well-known, VC brand endorsement is almost the entire foundation of retail investor trust. KOLs? They are responsible for spreading the word and even taking the blame.
Comparisons between VCs create a disadvantage. If the gods gather, but you can't get in, you're just a rookie. No matter how inexperienced you are, retail investors are still completely crushed in terms of information/funds. Not at the same level, who do you empathize with when you write it down? Retail investors only feel like it's crocodile tears...
Original link
Crypto KOL 0x Satoshis (@0x Satoshis):
In light of ZKasino's soft rug status, I have reviewed all the staking projects today, excluding ATOM+OSMO+TIA+DYM staking.
Currently, the projects participating in staking are:
1) swell+eigenlayer+renzo+puffer (a total of 20 E invested)
2) blast initially invested 25 E, now only 6 E remains, serious token inflation
3) list over 5000 U
4) merlin just staked Runestone
5) bouncebit less than 10,000 U
Next, I will periodically withdraw the principal or reduce my position to a reasonable level (the so-called reasonable is that if it goes to zero, I can accept it). I feel that the risk of staking in these nested projects is very high. If I stake one dollar in projects A, B, C, D, and E, the TVL becomes five dollars, but the market still only has one dollar. What if a project suddenly collapses or experiences a hacker attack? The risk is continuous, so while there is still liquidity, I should exit part of my investment.
Additionally, I want to emphasize again, do not trust KOLs' promotions, including this small investor. Just learn seriously from the content they share; as for whether to invest in the end, it must be decided by yourself. Investment is our own business, and KOLs provide content and information to assist our decision-making.
For beginners, it's advisable to participate less in staking projects; principal comes first. Experienced investors should control their positions and aim for high-impact low-cost opportunities.
Brothers, you can earn less, but you can't lose everything. Staking must control position size; I don't recommend using off-exchange leveraged borrowing for staking. In web3, nothing is impossible. Don't always think that there won't be any issues. Many people, including myself, thought the same about FTX back then. When the avalanche comes, no snowflake is innocent, so prepare your risk control in advance and be responsible for your wealth.
In conclusion: All the projects I participated in this article are merely my own reflections and do not constitute investment advice, and I am currently reducing my holdings. Please make your own judgments, DYOR!
Original link
Crypto KOL killthewolf.eth (@0x killthewolf):
The ZKasino incident is currently a hot topic. Although I didn't invest in or participate in staking this project, a total of four people have asked me if I want to invest in this KOL round. I'm writing down my thoughts and insights here, hoping to help everyone in selecting projects in the future.
The KOL round valuation is 9 million USD, with 15% unlocked at TGE. This condition seems like a no-brainer because the institutional valuation is 350 million USD, and I am 40 times cheaper than the institution. As for the 15% unlocking at TGE, I only need 60 million USD of FDV at the opening to break even, and institutions have long provided a valuation of 350 million USD.
The main two reasons why I ultimately did not participate:
First, why is the valuation 350 million? Recently, Ethena, which went on Binance, was valued at 300 million, and Puffer Finance was valued at 200 million. Why can ZKasino, a gaming platform, be valued at 350 million? Because of this valuation number, I have doubts about this round of financing package.
Second, the project team claims revenue of 8 million, although everyone agrees this number has some exaggeration, I still checked the addresses of the top 20 users by betting volume on the platform, all are suspected project team accounts inflating the volume.
Third, the character of the founder is very questionable. Previously, their official account used a bloody video of a murder case as a joke for marketing, and that incident also caused a lot of commotion. @zachxbt has exposed various things this person has done: https://x.com/zachxbt/status/1731025316204745113
From my perspective, this project has a false valuation, false revenue, poor character, and a lack of conscience, so in the end, I did not participate, and I was lucky to avoid a major pitfall.
Original link
