ZKasino Accused of Misappropriating $33 Million in User Funds

The developers of blockchain casino ZKasino transferred 10,515 ETH, valued at $33.9 million, to the Lido staking protocol instead of returning these funds to users and investors.

Ethereum was deposited by early project participants through a bridge for farming the native token ZKAS. The project team had promised that they would be able to reclaim the sent assets.

However, in an announcement on April 20, ZKasino declared the launch of its network and “changes to the initial plan.” All received ETH was allegedly converted into ZKAS at a “reduced rate of $0.055” with a 15-month vesting period.

“This conversion is done as a favor to our users who joined the ecosystem,” the blog stated.

The developers also altered the wording on their website, removing the statement that mentioned the return of ETH.

Analysts from EmberCN highlighted the suspicious transfer of funds to Lido.

8 小时前，ZKasino 将用户桥接存入 ZKasino 的 10,515 ETH($33.18M) 转移到 0x791 多签地址，然后存进 Lido 生息去了?https://t.co/k15pZ8a6DW

这些 ETH 是用户桥接存入 ZKasino 挖矿，结果 ZKasino 项目方一招修改官网说明，强行将用户存款的 ETH 换成了他们的平台代币? pic.twitter.com/1F9OUPB5Pt

— 余烬 (@EmberCN) April 21, 2024

“ETH was deposited by ZKasino users for farming. As a result, the project team changed the official site description and forcibly exchanged ETH for their platform token,” researchers explained.

Web3 developer known as cygaar revealed that the launched ZKasino is “an Arbitrum Nitro chain, deployed in two minutes.” Moreover, the protocol does not use zero-knowledge proofs or EigenDA, despite the team’s claims.

The funniest part of the Zkasino drama is that the chain they released has no zk tech in it at all (nor does it use EigenDA).

It’s an Arbitrum Nitro chain that took 2 minutes to deploy.

They put ZERO effort into scamming everyone lmao. pic.twitter.com/VkKYZWttGl

— cygaar (@0xCygaar) April 21, 2024

Meanwhile, investors and users of platform X have posted numerous warnings about a scam. Venture firm Big Brain stated that it never invested in ZKasino, which it perceives as fraudulent.

Big Brain Holdings invested into the @zigzagexchange project in 2022, which subsequently resulted in financial losses for us. Some of the previous founders of that project are now part of the @ZKasino_io team, which appears to be fraudulent.

We have never invested in ZKasino…

— Big Brain Holdings (@BigBrainVC) April 21, 2024

“Big Brain Holdings invested in ZigZag Exchange in 2022, which subsequently resulted in financial losses for us. Some of the co-founders of that project are now part of the ZKasino team, which appears to be unscrupulous,” the company noted.

In one thread, the alleged founder of ZKasino, known as Derivatives Monke, responded to a user’s message about being “sued for stealing $30 million.”

You’re a 60 year old boomer hanging out with 20 year old kids.

— Derivatives Monke (@Derivatives_Ape) April 20, 2024

“You’re a 60-year-old boomer hanging out with 20-year-old kids,” he wrote.

The ZKasino team has made no further statements regarding the situation.

Back in March, the price of the Candy token plummeted by 87% following a suspected rug pull by Lena Network developers. The incident occurred hours before the project announced it was relinquishing ownership of the coin’s contract.

In February, developers of RiskOnBlast—a gaming platform on the L2 Blast network—withdrew 420 ETH belonging to users, worth approximately $1.25 million, and disabled the website and social media.