ZKasino Misappropriates $33 Million of User Funds, Sets Out Scams Allegations and Rage of Investors

The blockchain gambling platform ZKasino has now come under immense scrutiny after this move of $33 million in investor and user funds to the staking protocol, Lido.

The revealed move was made known in a blog post on the 20th of April, a sharp deviation from its initial promise to return these funds.

An announcement by ZKasino on the subject confirmed that over 10,000 people have been drawn to its network, with transfers corresponding to 10,515 Ether in exchange for the platform's native ZKasino (ZKAS) tokens.

On the other hand, the platform went ahead to convert the bridged ETH to ZKAS tokens at a "discounted price of $0.055" and on a 15-month vesting period.

ZKasino described the changes as "done as a favour" to make sure they had a "seamless transition" into their chain, which does not use ETH.

This has, of course, raised lots of concerns with users, more so after the company redesigned its website with some previous guarantees to its users of ETH returns.

The case was, however, further investigated when on-chain analysis revealed that all user ETH in ZKasino were transferred to Lido. This controversion was further enlightened through an anonymous review by an anonymous developer only known as "cygaar," who criticized the technological base of the ZKasino blockchain.

According to cygaar, the blockchain was only "an Arbitrum Nitro chain that took 2 minutes to deploy," with none of the promised zero-knowledge or EigenDA technologies.

Outraged users have taken to X to voice their concerns, with some even accusing the project of being an exit scam and sharing personal details of ZKasino's founder, who goes by the nickname "Derivatives Monke," to push for legal actions.

It was aggravating when the Venture Capital Firm Big Brain decried the project.

Later in an X post dated April 21, Big Brain clarified that it "had never invested in ZKasino" despite earlier stating that it had a new round of Series A funding led by it at $350 million, with other notable investors including MEXC.

The actions of ZKasino have implicated MEXC, a crypto exchange acting as an investor, in the actions.

On April 21, TechFlow reported a statement from MEXC, which strongly underlined that the exchange was just one of the investors but also just another victim of ZKasino's decisions. Meanwhile, both ZKasino and its founder largely kept quiet in the face of backlash, with only a couple of updates and responses to criticisms at X. Nonetheless, Derivatives Monke is carrying on with minimal engagement on the platform, conveying both the determination to "keep building" and the possible effect of trying to look perfectly normal despite the growing controversy.