Crypto Gambling Platform ZKasino Sparks Outrage Over Suspicious Token Conversion

Following a month-long 'bridge-to-earn' program, crypto gambling platform ZKasino announced the launch of its own network, a 'seamless transition' that raised eyebrows. Without warning, the 10,505 ETH ($33 million at the time) bridged by users was converted to the project's own ZKAS token, which would be vested over 15 months with only 5% accessible immediately. The silence and multisig address movement of the converted funds has sparked allegations of a 'rug pull' from the crypto community, despite previous assurances of accessibility post-launch.

Crypto Gambling Platform ZKasino Sparks Outrage with Controversial Token Conversion

ZKasino, a crypto gambling platform, has ignited a firestorm of controversy with its recent announcement that it has converted all bridged Ethereum (ETH) to its native gas token, ZKAS, without prior notice. The move, which has been denounced as a "rug pull" by many in the crypto community, has raised serious questions about the project's integrity and the future of decentralized finance.

Unforeseen Token Conversion

In a purported "seamless transition," ZKasino informed users that their bridged ETH, valued at approximately $33 million at the time, had been converted to ZKAS tokens. However, to the dismay of users, these tokens would not be immediately accessible. According to ZKasino, only 5% of the ZKAS would be distributed upfront, with the remaining 95% vested over 15 months.

Suspect Actions Surround Fund Transfer

The converted ETH was transferred to a multisig address controlled by the ZKasino team, who subsequently deposited it into Lido, a popular staking platform. This move has raised alarms, as it allows the team to earn substantial interest on the funds, estimated at over $1 million annually.

Broken Promises and Deleted Evidence

The announcement of the token conversion came as a shock to many, who had relied on earlier assurances from ZKasino that their bridged ETH would remain accessible for withdrawal upon the launch of the new network. The platform's website previously stated that funds would be "returned and can be bridged back" once the chain went live. However, these promises have since been removed or deleted from the website and social media channels.

Communication Breakdown and Chinese Ban

Communication with ZKasino became strained as the backlash intensified. In the Telegram group, moderators abruptly shut down discussions and banned the use of Chinese, citing concerns about hiring hitmen. This move further alienated users and undermined the project's credibility.

Concerns Raised over Team's History

ZachXBT, a renowned crypto investigator, raised concerns about the ZKasino team last year, labeling them as "proven bad actors." He cited previous incidents of unpaid debts and questionable marketing practices.

Distancing from VC Firms

In the wake of the controversy, several venture capital firms that had previously been associated with ZKasino have distanced themselves from the project. The team has largely refrained from directly addressing the criticism, instead opting to post generic marketing tweets that vaguely dismiss concerns as "noise and FUD."

Questions about Technology and Validity

Beyond the token conversion issue, the ZKasino project has also faced scrutiny for its use of buzzwords and questionable technological claims. While the project markets itself as incorporating "zk" (zero-knowledge) technology and "EigenDA" (for data availability), critics have pointed out that the underlying blockchain is simply an Arbitrum Nitro chain that can be deployed in minutes. The project's "pre-audit" was reportedly conducted by ChatGPT, raising concerns about the thoroughness of its security review.

Conclusion

The ZKasino token conversion has sparked a significant backlash, raising fundamental questions about the nature of trust and transparency in the decentralized finance ecosystem. The project's actions, coupled with concerns about the team's history and technological validity, have deeply eroded user confidence. As the investigation continues, the crypto community awaits a full accounting of the events surrounding this controversial incident.