About two weeks ago, an alleged “rug pull” took place in the cryptocurrency industry, this time focusing on gambling platform and blockchain casino ZKasino, in which many investors said their funds disappeared.
Despite facing allegations from investors, ZKasino’s X continued to release updates, but then suddenly disappeared from public view, seemingly taking investors’ funds with it. This incident once again highlights the risks in the cryptocurrency investment field, especially in decentralized finance (DeFi) projects that lack adequate regulation.
The latest development saw Dutch authorities arrest a suspect and seize more than $12 million in the process.
Alleged cryptocurrency scammer arrested
The Netherlands Fiscal Information and Investigation Service (FIOD) revealed on Wednesday that a 26-year-old man had been arrested in connection with the Rug Pull incident involving Zkasino earlier this week.
According to a press release, Dutch law enforcement authorities have launched a $33 million cryptocurrency gambling scam investigation since April 25. The criminal investigation was reportedly initiated based on online reports from crypto community members and information from the intelligence unit of the Netherlands’ Fiscal Information and Investigation Service (FIOD).
During the investigation, Binance’s Financial Crime Compliance Team assisted the FIOD, helping to secure millions of euros worth of cryptocurrency assets. At the same time, the Prosecutor’s Office also assisted the investigation team in contacting members of the ZKasino group.
On April 29, the FIOD arrested a man on suspicion of "fraud, embezzlement and money laundering." After the suspect was brought before a magistrate, his detention was extended to 14 days for the "necessities of the investigation."
As part of the investigation, law enforcement authorities searched the suspects’ homes and seized approximately €11.4 million (approximately $12.25 million) in various assets. The FIOD seized properties including real estate, luxury cars, and multiple cryptocurrencies during the operation.
Dutch authorities said that further arrests could not be ruled out, as those involved in this fraud case need to cooperate with law enforcement agencies to help recover and return the stolen money to the victims. This means that the investigation may still be ongoing and other suspects may be held accountable. The authorities' statement also emphasizes their determination to completely solve this crime and work hard to recover the losses of the victims.
ZKasino, a scam from the beginning?
As reported by Bitcoinist, scam rumors about the crypto gambling platform began in March when decentralized exchange (DEX) ZigZag leveled serious allegations against the project. According to the rival crypto exchange, ZKasino failed to pay developers and other contractors who helped build the platform.
In addition, ZigZag further questioned in its post, claiming that the so-called $40 million ecosystem previously announced by ZKasino is not real, and implying that the funds may never be paid in the form of actual currency. If true, such a statement would be a major blow to the legitimacy and credibility of the ZKasino project.
Despite warning signs, investor confidence in the cryptocurrency project didn’t completely collapse until April 20. After changes to the project’s website, users began to notice and report suspicious operations. It was after these changes to the website were noticed that the project’s credibility and investor trust began to plummet, ultimately leading to the collapse of the entire project.
A user of Platform X found that in the previous description of the ZKasino platform, there was a paragraph about “How to earn income through bridging”, which mentioned that once the ZKasino chain and its native token ZKAS were launched, the Ethereum that investors had previously transferred through the bridge would be returned to them. However, this description was allegedly deleted later.
It is worth noting that ZKasino promised investors that they could recover their investment within 30 days. The project team claimed that investors could withdraw the Ethereum they transferred through the bridge at a 1:1 ratio. However, the actual situation was contrary to the promise. Users found that their funds were not freely withdrawn as promised, but were locked in ZKAS tokens, and a 15-month vesting period was attached (that is, users need to wait 15 months before they can fully use these funds).
After ZKasino’s chain went live, the cross-chain beam used for fund transfers suddenly became unusable, which caused concern among investors. Later, the project team came out to explain that the cross-chain beam is currently under maintenance and will be put back into use with this update or release event.
The project’s X account continued to post updates until April 24, announcing that the bridge functionality had been re-enabled. While users expressed dissatisfaction with the theft of funds, the announcement also stated that users could now “move your $ZKAS tokens from the ZKasino chain to the Ethereum chain.”
After the project released the last announcement and did not deal with the user funds, users were convinced of their suspicions that they had encountered a so-called "rug pull" fraud. FIOD's investigation found that ZKasino's promises to investors were actually empty promises, because the design of the smart contract showed that the funds were never planned to be returned to investors. #ZKasino #Rugpull