ZachXBT alleges Alameda-backed ZKX announced raise and launched token despite shutdown risk

Blockchain sleuth ZachXBT alleged that ZKX, a gamified social derivatives trading DEX on Starknet and Ethereum, announced it had raised millions in funding and launched its governance token, despite a risk of shutting down.

On Tuesday, ZKX announced it would discontinue the project, delisting all markets, closing positions and returning funds to users’ trading accounts. Founder Eduard Jubany Tur stated it had been “unable to find an economically viable path for the protocol” amid “minimal” user engagement and a token generation event that “didn’t meet expectations” as holders continue to cash out the “undervalued” asset.

“The sunset period will last until the last day of August. ZKX vesting and distribution will continue after sunset on September 1. We strongly encourage everyone to withdraw their funds before sunset through August and claim any pending STRK rewards,” he added.

ZKX fundraising and token generation event

ZKX raised $4.5 million in seed funding, announced in July 2022, from investors including Alameda Research, StarkWare and HTX. Amber Group and Crypto.com also joined that round, as did Polygon co-founder Sandeep Nailwal and DragonFly Capital General Partner Ashwin Ramachandran.

On June 19, the project announced it had raised a total of $7.6 million in funding to date following a further strategic round from investors including Flowdesk, GCR and DeWhales, among others, designed to “accelerate the expansion of the ZKX protocol” and introduce new features.

The project’s ZKX governance and staking token went live the same day on KuCoin, Gate.io and Bitget, alongside an airdrop to reward active community members and early adopters. “This milestone marks the beginning of a transformative year for ZKX and our users,” Eduard Jubany Tur said at the time.

Following the ZKX founder’s closure announcement, ZachXBT posted to X on Wednesday, “Wtf is this rug. 1) Your team announced a raise of $7.6M just a few weeks ago. 2) TGE for ZKX was only a few weeks ago.”

In response, Eduard Jubany Tur said the funds were raised from 2021 to 2024 to support a team of 30 people building a dedicated blockchain for scaling perps, including multiple code audits and other expenses, and that all user funds had been returned with over 80% of users already withdrawing from the protocol to self-custody.

“Core founders didn’t sell a single token from their allocations and unfortunately have seen four years of work and their lives evaporated,” he added. “In hindsight, choosing to run a fully on-chain smart contract protocol instead of an L3 and other strategic decisions would have been wiser financially. We have learned it the hard way.”

“You left out all the people you baited into buying your scam token at TGE with the funding announcement right before shutting down shortly after,” ZachXBT said. “All of what you just shared did not happen between TGE and today.”

ZKX 'rugpull' complaints

Similar complaints of the project’s “rugpull” emerged from other community members on Thursday, posting direct messages with the project's team alleging it was "hiding key facts" in the period between announcing the latest fundraising and token launch and the platform's shutdown.

"Pre-announcing the closure would have been a security risk since people could withdraw from the order books and someone could have exploited and put every customer's funds at risk," Eduard Jubany Tur appeared to write in one of the messages. "We wanted to make sure customer's funds were safe until we delisted and closed all markets. We couldn't risk exploits, we had to be responsible for the customer's funds."

However, Bru Finance founder Ashish Anand appeared to push back against the allegations, suggesting that $2.5 million per year of burn rate was “not a big sum in crypto” and that it’s possible the token sale was the project’s “only hope to raise money as well as give exit to investors and that did not go well.”

“ZKX launched a token, announced an old raise/did KOL marketing and decided to shut down the project six weeks after TGE. That is a rug under any context,” ZachXBT replied. 

“The team knowingly misled the community/retail into buying a token by giving the appearance the project was healthy and strong when in reality they were in a bad position and about to shut down,” the blockchain sleuth added. “All of the issues now raised by the team did not happen after TGE. It is retail/community who are the victims of this incompetence.”

ZKX is currently trading for $0.01, down 19% over the last 24 hours and 74% during the past week, according to CoinGecko data.

ZKX and Eduard Jubany Tur did not immediately respond to The Block’s request for comment.

Headline and content has been updated for clarity.