ZKasino's $33M Fund Transfer Raises Exit Scam Concerns

Amidst controversy, blockchain-based gambling platform ZKasino faces accusations of an exit scam after unexpectedly diverting $33 million of investor and user funds to Lido staking protocol, a significant departure from its initial promise to return the funds. The platform's revised plan, involving converting bridged ETH to ZKAS and imposing a vesting schedule, has sparked outrage among users, who discovered changes in website wording and a substantial on-chain transfer to Lido. ZKasino's founder's personal information has been made public, leading to calls for legal action, while allegations of fraud and misrepresentation continue to swirl.

ZKasino's Controversial Fund Transfer and Alleged Exit Scam Raise Concerns

London, April 22, 2023 - Blockchain-based gambling project ZKasino has sparked an outcry among investors and users after abruptly shifting its plan to return $33 million worth of funds to a staking protocol.

According to an April 20 blog post by ZKasino, the project's network had gone live, prompting over 10,000 users to bridge a collective 10,515 Ether (ETH) to the network in anticipation of receiving more of its ZKasino (ZKAS) token. However, the post revealed a significant change from the original plan, stating that the bridged ETH had been converted to ZKAS at a "discounted rate of $0.055" on a 15-month vesting schedule.

The project claimed that this deviation from the initial plan was intended as "a favor" to provide a "seamless transition" due to its chain not using ETH. Users also noted that the project had removed a statement from its website indicating the ETH would be returned.

Concerns intensified after an on-chain transfer revealed that ZKasino had transferred all of the bridged ETH into the Lido staking protocol.

Allegations of Fraud and an Exit Scam

Amidst these concerns, an anonymous crypto developer known as "cygaar" raised further doubts regarding the authenticity of the blockchain ZKasino deployed. Cygaar claims that the blockchain was "an Arbitrum Nitro chain that took 2 minutes to deploy" and did not employ zero knowledge technology or EigenDA, as the project had asserted.

On online forums, hundreds of purported ZKasino users have accused the project of being an exit scam and have disseminated the personal information of the project's founder, known as "Derivatives Monke."

Venture Capital Firm Joins the Criticism

Adding to the controversy, venture capital firm Big Brain alleged in an April 21 post that ZKasino "appears to be fraudulent." The firm claimed it never invested in the project but was offered a token distribution that it has not received and "will not opt to receive."

Previously, ZKasino had announced a Series A investment round at a $350 million valuation, citing backing from crypto exchange MEXC and venture firm Big Brain Holdings.

Crypto Outlet Reports MEXC's Response

Crypto outlet TechFlow reported on April 21 that MEXC had stated that it was "just one of the investors" in ZKasino and that the project's "behavior has nothing to do with us." MEXC added that as an investor, it too was a victim of the situation.

Official Silence and Social Media Activity

ZKasino, its founder, parent firm ZigZag Labs, and MEXC have not yet responded to requests for comment.

ZKasino has remained relatively muted on social media amid the backlash. The project posted a brief update on April 22 regarding integration of EIP-3074, a technical specification.

Derivatives Monke, the project's founder, has responded to criticism on social media, defending the project's decisions and promoting its latest development updates.

Conclusion

The ongoing saga of ZKasino has raised significant concerns among investors and the crypto community. The project's abrupt change in plans, alleged fraudulent activities, and accusations of an exit scam have cast doubt on its legitimacy and transparency. As the situation continues to develop, it remains crucial for investors to exercise caution and conduct thorough due diligence before entrusting funds to any project, especially those making bold promises and offering significant returns.