ZKX Shutdown Raises Suspicions: A Carefully Orchestrated “Scam”?

On July 30, the derivatives DEX ZKX announced its shutdown, citing the inability to find an economically viable protocol path. However, some community members questioned the shutdown, noting that just over a month ago, ZKX had announced raising $7.6 million, and the TGE (Token Generation Event) had just begun a few weeks before. This seemed illogical.

Founder Eduard responded on the X platform, stating that the $7.6 million raised was accumulated from 2021 to 2024, supporting a 30-person team building a dedicated blockchain for perps, including multiple code audits with Nethermind and TGE listing costs. He assured that all user funds were returned, over 80% of users had exited the protocol, and core founders hadn’t sold any of their allocated tokens.

Despite this response, skepticism persisted. Crypto KOL Jin Kang revealed issues on the X platform, questioning the team’s lack of transparency and sharing conversations with the ZKX team, urging investors to speak up and demanding explanations from market makers and CEXs. Here are the details:

If This Isn’t a Scam, Then What Is It?

• The team shut down 6 weeks after the TGE due to “inability to find an economically viable protocol path.”
• Token allocation changed during the TGE.
• Circulating supply increased during the TGE (relative to the whitepaper), causing prices to plummet.

After the ZKX TGE, prices fell by over 50% within the first 24 hours.

The team’s explanation was that market makers like Amber Group, Flowdesk, and IMC couldn’t stabilize the price at $0.7 due to a small number of users selling.

They claimed to be waiting for grants from the Starknet team to address the issue.

The team mentioned potential migration in collaboration with the Berachain team and hinted at spending $1 million if necessary, expressing a willingness to lead a guided launch.

However, less than 6 weeks later, they announced the project’s shutdown.

ZKX Team Concealed Key Facts, Blaming Market Makers for the Price Crash:

• Claimed one market maker sold 3.5 million out of 4 million tokens during the TGE: https://etherscan.io/address/0xcEfE7FC3Ee3d6804B9073A69B2F45C67253Cc3a5#tokentxns
• Increased loans to market makers to support liquidity.

The first image below shows a wallet snapshot before the TGE. The second image shows token economics, with over 10 million tokens in circulation before the TGE (contrary to token economics). The third image is CEX marketing incentives; Gate, KuCoin, and Bitget need to confirm this.

Notably, during the first 9 hours post-TGE, the ZKX team blocked all transfers from Starknet to the mainnet.

During this period, all trades were from the team/market makers/CEX. About 1 million tokens were sold during this time, which the team denied.

Due to the need for liquidity by market makers, the team changed token economics at the last minute of the TGE, increasing market maker allocation from 4% to 8.5%.

For the first 9 hours, only CEX/market makers/team held ZKX, with no explanation for the CEX price crash cause. Investors were not informed of the process.

The Worst Part Was Allowing Time for Clarification. But a Month Later, They Cited Insufficient Funds to Shut Down the Project, Claiming to Be Dealing with Various Threats (Unclear Origin of Threats).

The team hasn’t explained how the $7.6 million was spent over the past three years or why the TGE failed.

If market makers Amber Group, Flowdesk, and IMC required loans double the actual amount (over-loaning), they should explain this.

CEX platforms CoinEx Global, Gate, KuCoin, and Bitget should clarify if they sold marketing incentive tokens.

If not, then the ZKX team is lying.

In communication with the team, ZKX was not transparent.

Due to high costs (no subsidies from Starknet?) and a payroll of over 30 people, spending $7.6 million in less than 3 years? This situation is unheard of.

Other ZKX investors are encouraged to voice their opinions. The crypto industry needs to eliminate such opaque behaviors, and the Starknet team needs to explain why they supported this project.