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ZKasino Stirs Community Ire by Redirecting $33M of ETH to Staking Protocol Instead of Issuing Refunds

ByDayne Lee

Apr 24, 2024
ZKasino Stirs Community Ire by Redirecting $33M of ETH to Staking Protocol Instead of Issuing Refunds

ZKasino Stirs Community Ire by Redirecting $33M of ETH to Staking Protocol Instead of Issuing Refunds

ZKasino, a blockchain-based gambling project, is currently under fire for reallocating $33 million worth of Ether (ETH) entrusted by users and investors to the staking protocol Lido, deviating from its original commitment to reimburse them. This abrupt shift was disclosed in a blog post dated April 20, coinciding with the announcement of ZKasino’s network launch. Initially, users had transferred a total of 10,515 Ether to the network, anticipating a return in the form of ZKasino (ZKAS) tokens.

Controversial Shift in Fund Management

Contrary to expectations, ZKasino altered its refund policy, stating in the post that the ETH was converted into ZKAS tokens at a “discounted rate of $0.055” over a 15-month vesting period. The platform justified these changes as necessary for a “seamless transition,” given that its chain does not utilize ETH. This revelation came after users observed modifications to the project’s website, notably the removal of previous assurances about the return of ETH.

The situation escalated as an on-chain transaction confirmed the transfer of all user-contributed ETH to Lido, intensifying user concerns. Accusations of an exit scam began circulating on X, driven by hundreds of disgruntled backers of the project. Some users have gone so far as to distribute the personal details of ZKasino’s founder, “Derivatives Monke,” advocating for legal recourse.

Venture Capital Conflicts

Adding to the turmoil, the venture capital firm Big Brain publicly denied any formal investment ties with ZKasino, despite claims of securing Series A funding from notable entities including the crypto exchange MEXC. Big Brain refuted involvement, clarifying that it declined an offer for a pro-rata token distribution and disavowing any future acceptance.

In a subsequent development, MEXC clarified its role as merely one of several investors, distancing itself from ZKasino’s operational decisions and echoing sentiments of being victimized by the project’s actions. Reports from crypto news outlet TechFlow further highlighted these denials and the growing discontent among investors and the crypto community.

Silence and Minimal Responses

Amid the backlash, ZKasino has maintained a low profile, offering only minor updates on technical integrations like EIP-3074. Responses from “Derivatives Monke” to criticisms on X have been sparse, focusing instead on future development plans for the project.

The unfolding controversy around ZKasino underscores the complexities and risks associated with blockchain projects and the management of decentralized funds. As the community seeks clarity and recourse, the episode serves as a cautionary tale about the importance of transparency and trust in the burgeoning field of cryptocurrency ventures.

Featured image credit: Murat Kıran via Medium

Dayne Lee

With a foundation in financial day trading, I transitioned to my current role as an editor, where I prioritize accuracy and reader engagement in our content. I excel in collaborating with writers to ensure top-quality news coverage. This shift from finance to journalism has been both challenging and rewarding, driving my commitment to editorial excellence.

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