Blockchain Casino ZKasino Diverts $3F3 Million to Staking Platform Lido Instead of Refunding Users

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Blockchain Casino ZKasino Diverts $3F3 Million to Staking Platform Lido Instead of Refunding Users

Blockchain gambling platform ZKasino is facing backlash from users on X (formerly Twitter) after it moved more than $33 million worth of user and investor funds to a staking platform. The ZKasino public has criticized the transfer and accused the platform of scamming users.

ZKasino is a crypto-focused online gambling platform like other crypto gambling sites, that uses crypto, blockchain, and smart contracts to deliver new casino experiences.

On April 20, ZKasino announced in a blog post that its network was live. As expected, over 10,000 community members who had bridged more than 10,500 Ether (ETH) to receive the platform’s ZKAS tokens awaited a refund of their ETH. Instead, on-chain data showed that a day after the launch, ZKasino moved the funds to Lido, an Ethereum-based liquid staking protocol.

In its announcement, the platform noted it changed the initial plan, and will convert all bridged ETH to ZKAS tokens at a discounted rate of $0.055. The publication also explained the move was necessary because the ZKasino chain uses ZKAS as the gas token instead of ETH. Furthermore, ZKasino decided that users will only get 5%, with the rest vested over 15 months.

This explanation irked users, who also noticed that the platform’s website had removed a statement promising to return ETH. Following the announcement, Etherscan data revealed that ZKasino transferred more than 10,515 ETH to Lido. 

The ZKasino community reacted to the news, accusing the platform of perpetrating an exit scam. One X user noted that ZKasino’s blockchain did not use zero-knowledge technology or EigenDA as advertised. According to the user’s post, the blockchain is an Arbitrum Nitro chain that was hurriedly deployed to scam users.

Reportedly, users have already found and spread personally identifying information about ZKasino’s founder, hoping to use the details for legal recourse if the situation proves to be another instance of online gaming fraud.

Crypto VC Firm Denies ZKasino Investment

Big Brain Holdings, a venture capitalist initially believed to have invested in ZKasino, has now dissociated itself from the gambling platform. In March, ZKasino announced it had concluded a $350 million Series A funding round with several notable investors, including Big Brain Holdings and crypto exchange MEXC. Unfortunately, Big Brain announced on X that it has never invested in ZKasino. 

The venture capitalist’s post also contains information about a 2022 investment into ZigZag Exchange. According to Big Brain, some of the ZigZag founders are now part of the ZKasino team, a move it considers fraudulent.

Interestingly, ZigZag Exchange has also denounced ZKasino, stating that the casino’s founders built their platform using funds stolen from the exchange. According to the post, ZKasino’s founders pretended to pay developers for building the ZigZag frontend but then used parts of the money they stole to build ZKasino. Furthermore, the post notes that while ZigZag raised $15 million, the funds were deposited into addresses controlled by ZKasino founders. 

Vitalik Buterin Believes ZKasino is a Scam

Ethereum co-founder Vitalik Buterin has now weighed in on the ZKasino problem. Indirectly calling the platform a fraud, Buterin wrote that ZKasino does not use zero-knowledge technology. He added that “ZK” is now so popular that scammers are fraudulently adopting it.

ZKasino recently announced plans to launch a decentralized autonomous organization (DAO) for community members to participate in the platform’s decision making. According to the announcement, potential use cases include changing game contracts, launching new games, facilitating community initiatives, and voting on platform upgrades.

ZKasino is a decentralized blockchain casino and betting platform that allows users to enjoy casino games on the blockchain. According to the platform’s website, gamblers can play blockchain versions of several popular casino games, including crypto poker, slots, dice, plinko, and several others. Unfortunately, most members of the community are currently unsure whether or not the developers launched an exit scam.