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ZKasino Faces Backlash for Misusing $33 Million in User Funds, Sparking Fraud Allegations and Investor Outrage

The blockchain gambling platform ZKasino has faced significant criticism after diverting $33 million in investor and user funds to the staking protocol Lido.

This move, disclosed in a blog post on April 20, deviated sharply from the initial promise to return these funds.

According to ZKasino’s announcement, its network had successfully launched, attracting over 10,000 users who transferred a total of 10,515 Ether in exchange for the platform’s native ZKasino (ZKAS) tokens.

Contrary to expectations, the platform converted the bridged ETH to ZKAS tokens at a “discounted rate of $0.055” on a 15-month vesting schedule, a change from the original plan.

ZKasino described these changes as “done as a favour” to ensure a “seamless transition” to its chain, which does not utilize ETH.

This led to user concerns, especially after the company altered its website to omit previous guarantees of ETH returns.

Further scrutiny arose after an on-chain analysis revealed that ZKasino had transferred all the user’s ETH to Lido. Adding to the controversy, an anonymous developer identified as “cygaar” criticized the technological underpinnings of ZKasino’s blockchain.

According to cygaar, the blockchain was merely an “Arbitrum Nitro chain that took 2 minutes to deploy” and did not incorporate the promised zero knowledge or EigenDA technologies.

Outraged users have voiced their concerns on X, with some accusing the project of being an exit scam and sharing personal details of ZKasino’s founder, known as “Derivatives Monke,” to push for legal actions.

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The situation escalated with Venture capital firm Big Brain denouncing the project.

In an X post dated April 21, Big Brain clarified that it “never invested in ZKasino” despite previous claims by ZKasino of securing a Series A funding at a valuation of $350 million from notable firms including MEXC and Big Brain Holdings.

In response, MEXC, a crypto exchange implicated as an investor, distanced itself from ZKasino’s actions.

On April 21, TechFlow reported MEXC’s statement emphasizing that the exchange was “just one of the investors” and also a victim of ZKasino’s decisions.

Meanwhile, both ZKasino and its founder have remained largely silent on the backlash, except for minimal updates and responses to criticisms on X.

Despite the turmoil, Derivatives Monke continues to engage minimally on the platform, indicating a commitment to “keep building,” reflecting a possible attempt to maintain a facade of normalcy amidst the growing controversy.

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Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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