ZKasino $30M ‘favor’ to users — seamless transition or rug pull?

Following a month-long ‘bridge-to-earn’ program, crypto gambling platform ZKasino launched its own network on Saturday. However, the announcement included a nasty surprise.

In what ZKasino referred to as a ‘seamless transition,’ users were informed that “All bridged Ethereum has been converted to our native gas token, ZKAS… as a favor to our users.”

Not only was the 10,505 ETH, (worth $33 million at the time of writing) converted to the project’s own token without forewarning, but the tokens themselves would not be available to users right away. “Keep in mind that the majority of ZKAS is vested over 15 months, only 5% is distributed out immediately.”

The ‘bridged’ ETH was sent to a multisig address controlled by the team. The sum was then deposited into Lido a few minutes later where it earns over $1 million per year, given the current staking yield of 3.2%.

The move has been branded by much of the crypto community as a ‘rug pull,’ especially given the multiple previous assurances that the funds would be accessible for withdrawal once the new network went live.

The site’s bridge webpage (now offline) previously stated that once the chain was live, funds would be ‘returned and can be bridged back.’ Deleted tweets and audio clips confirm the same.

Communication breakdown

On Friday evening, a user asked why the website’s promise to return ETH had been removed in the ZKasino Telegram group. The chat went ‘on lock’ shortly afterwards, with the simple explanation of ‘No moderator available.’

ZKasino’s chat was locked after a user asked why the promise to return ETH had been removed.

The following morning, the use of Chinese in the chat was banned — purportedly because people were hiring hitmen — before the moderator gave up completely: “No point even unlocking the chat,” they wrote.

ZachXBT raised concerns over the ZKasino team late last year, labeling them ‘proven bad actors.’

Read more: Crypto security firms more concerned with social media clout than the details

Others pointed out that the project has nothing to do with the various buzzwords that it uses to market itself, such as ‘zk’ (zero-knowledge) technology and ‘EigenDA’ (for data availability). The underlying ‘ZKasino chain’ is instead an ‘an Arbitrum Nitro chain that took two minutes to deploy.’

The project’s ‘pre-audit’ was conducted by ChatGPT ahead of a full audit by Certik.

In the wake of the backlash, VC firms have distanced themselves from the team, who avoided engaging directly with criticism, preferring to post a standard marketing tweet that only tangentially refers to ‘noise and FUD.’

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