ZKasino Faces Controversy for Moving $33M in Investor and User Funds to Lido Staking Protocol

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ZKasino, a blockchain-based gambling project, has found itself at the center of a heated controversy after it abruptly shifted $33 million worth of investor and user funds to the staking protocol Lido. 

The move deviated from the project’s initial plan to return the funds to its users.

In a blog post on April 20, ZKasino announced the launch of its network. 

Over 10,000 users had bridged a total of 10,515 Ether (ETH) to the network, hoping to acquire the ZKasino (ZKAS) token. 

However, instead of returning the ETH as promised, ZKasino stated that it had made changes to its original plan. 

The bridged ETH was converted to ZKAS at a discounted rate of $0.055, subject to a 15-month vesting schedule.

ZKasino Backtracks On Promise to Return ETH

ZKasino justified these changes as a means to facilitate a smooth transition, as its chain did not utilize ETH. 

Users also noticed that the project had altered the wording on its website, removing the statement guaranteeing the return of the ETH.

Concerns escalated further when an on-chain transfer revealed that ZKasino had moved all 10,515 ETH from its users into the Lido staking protocol. 

1 小时前，一鲸鱼在链上以 $3,083 的价格将 1,575 MKR 出售为 485 万 USDT，然后转入币安。

这 1,575 MKR 是该鲸鱼在 03/13-3/22 期间以 $2,871 的价格买入，如今以 $3,083 的价格售出，获利 $33 万 (+7%)。

另外，该鲸鱼曾在 03/29 以这 1,575 MKR 为抵押品在 Aave 借款 100 万 USDT 以 $1.68… pic.twitter.com/uhxXnMYIPb

— 余烬 (@EmberCN) April 21, 2024

Additionally, a crypto developer known as “cygaar” raised suspicions that ZKasino’s released blockchain was merely an Arbitrum Nitro chain, lacking zero-knowledge technology or EigenDA despite the project’s claims.

On social media platform X, numerous posts from purported ZKasino users who had invested in the project now accuse it of being an exit scam. 

Some individuals even resorted to sharing the personal information and address of ZKasino’s founder, known on X as “Derivatives Monke,” while calling for legal action.

VC Firm Raises Suspicions Around ZKasino Funds

Further controversy emerged when venture capital firm Big Brain claimed, in an April 21st X post, that ZKasino appeared to be fraudulent. 

Big Brain stated that it had never invested in ZKasino and had not received the pro-rata token distribution that was promised to them.

Previously, ZKasino had announced on X that it had secured a Series A investment round at a valuation of $350 million, with support from crypto exchange MEXC and venture firm Big Brain Holdings, among others. 

However, MEXC distanced itself from the project, stating that it was just one of the investors and that ZKasino’s behavior had nothing to do with them.

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

Amidst the mounting backlash, ZKasino has remained largely silent on X, with the project only posting an unremarkable update about integrating EIP-3074.

Meanwhile, the Ethereum network has surpassed one million validators, with approximately 32 million Ether, worth around $114 billion, staked within the network.

As reported, data from the Dune Analytics dashboard, which tracks Ethereum staking progress, show that the validator count reached the one million mark on March 28. 

The 32 million ETH staked represents approximately 26% of the total supply, highlighting the substantial commitment to Ethereum’s proof-of-stake (PoS) consensus mechanism.

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