ZKasino - Rekt

The house always wins and ZKasino hit the jackpot, making off with a $33 million rug over the weekend.

Despite red flags like abruptly canceled token listings, shady team responses, pumped tech claims, and unpaid employees/contractors, ZKasino still managed to raise a massive war chest.

In a brazen rug move, the platform converted over 10,500 ETH worth $33 million into $ZKAS tokens at an inflated price without user consent.

As evidence of the scheme mounted, ZKasino went dark, shutting down communication channels and banning users who dared to call out the rug pull.

The signs were there, were people too degen to read them?

Credit: ZigZagExchange, ZachXBT, cygaar, defizard, ardxt

The mechanics behind ZKasino's brazen theft were straightforward, yet the red flags leading up to it were plentiful.

The crypto betting platform claims to have raised $26 million in a Series A funding round for a lofty $350 million valuation from major investors, including MEXC, Big Brain Holdings, Trading Axe, Pentoshi and Sisyphus.

Big Brain Holdings claimed it received a token distribution offer from ZKasino that it will not opt to receive and look to be distancing themselves from the fraudulent project.

Suspicions were there from the start with CEO and founder Ildar Elham aka Derivatives Ape, who had a shadowy past involving the failed ZigZagExchange and Syncus projects.

According to tweets from the official ZigZagExchange account, Elham was one of the founders who conducted the $15 million fundraise for ZigZag.

However, it's alleged that as one of the 3/5 multisig signers, Elham and the other ZKasino founders misused those funds to secretly build out ZKasino instead.

Built on a foundation of lies it appears.

Some have 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.’

False advertising was merely a symptom of ZKasino's dubious operations. As early as December, ZachXBT had been sounding alarms about the project's founder and team, calling them out as bad actors who avoided paying what they owed in several instances:

The allegations painted a picture of a team with little regard for integrity or accountability long before the rug pull.

The Series A investors had terms of 15% TGE, 3 month cliff, and 15 month linear vesting, the same vesting schedule that was ultimately imposed on user funds without disclosure.

ZKasino had also initially planned IDOs on ApeTerninal and AIT Protocol that were abruptly canceled without explanation, another red flag.

In their Telegram investor chat, team member XBT_Prometheus repeatedly downplayed concerns, stating "We're still building", "People always FUD, it's normal", and "We didn't scam anything" as questions mounted.

ZKasino CEO promised users a clean payout if they locked their ETH to farm the $ZKAS token, vowing to let them withdraw initially deposited ETH at a 1:1 ratio later on.

But in a brazen rug move, the platform instead converted over 10,500 ETH worth $33 million into $ZKAS at an inflated price without consent.

To compound the scheme, that staggering ETH pile was then staked on Lido to lock up the funds with a 15 month vesting schedule that was never mentioned.

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.

In the end, ZKasino's trail of red flags, deception, and unethical practices was glaringly obvious to anyone who cared to look.

This rug eventually unraveled into one of the biggest and most obvious crypto exit scams of the year.

For Satoshi’s Sake, if ZachXBT is calling something a scam months in advance, run and do not walk to the exits!

Who likes to gamble at a casino where only the house wins?

The shady history of the founder should have raised concerns about his ability to lead a legitimate project like ZKasino successfully.

However, investors and users seemingly overlooked or ignored these warning signs about the founder's past.

Furthermore, there were allegations of unpaid employees and contractors, as well as claims of mismanagement from sources like ZachXBT.

These reports hinted at potential issues within the ZKasino team and operations, which should have prompted further scrutiny and due diligence from those considering investing or participating in the platform.

ZKasino made inflated claims about using advanced technologies like zkSync, when in reality, the platform was simply running on the more basic Arbitrum network.

This brazen discrepancy between their marketing and reality should have erased any last shreds of credibility.

The Captain Obvious of red flags was the abrupt cancellation of ZKasino's token listings without clear explanations provided.

Such last-minute changes, especially without transparency, should have been seen as potential signs of trouble brewing behind the scenes.

But sometimes when people step into the casino, they may already know in the back of their mind that they could lose it all.

ZKasino sure was a losing bet, wasn’t it?

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