ZKX suspension questioned: market makers blamed, $7.6 million in funds used in unknown way

Original author: Jin Kang, crypto KOL

Original translation: Felix, PANews

On July 30, the derivatives DEX ZKX announced that it would stop operating, saying that it could not find an economically viable protocol path. However, some community users questioned the suspension of operations. More than a month ago, it announced that it had raised $7.6 million, and the TGE had just started for a few weeks and then stopped operating, which seemed unreasonable.

Founder Eduard responded on the X platform that the previous $7.6 million in financing was raised from 2021 to 2024 to support a team of 30 people to build a dedicated blockchain for extended perps, including multiple code audits with Nethermind, TGE listing costs, etc. All user funds have been refunded, and more than 80% of users have withdrawn from the protocol. The core founders did not sell any of their allocated tokens.

But the response did not "stop the public mouth". Crypto KOL Jin Kang broke the news on the X platform today, questioning the team's opacity and other issues, and publicly disclosed the dialogue with the ZKX team, hoping that investors would speak out and asking relevant market makers and CEX to give explanations. The following is the content details.

If this is not a scam, then what is it?

· The team closed 6 weeks after the TGE due to "unable to find an economically viable protocol path"

· The ownership of the tokens changed at the TGE

· The circulation increased at the TGE (relative to the white paper), causing the price to plummet

After the ZKX TGE, the price fell by more than 50% in the first 24 hours.

The team explained that market makers like Amber Group, Flowdesk, and IMC were unable to stabilize the price at $0.7 because a small number of users sold off.

They said they were waiting for a grant from the Starknet team to solve this problem.

The team mentioned that they were working with the Berachain team on a potential migration and hinted that they could spend $1 million if necessary, but they were happy to do a bootstrapped launch anyway.

But in less than 6 weeks, they announced the cessation of the project.

The ZKX team hid key facts and blamed the market makers for the price crash:

· Claimed that one of the market makers sold 3.5 million of the 4 million tokens at the TGE: https://etherscan.io/address/0xcEfE7FC3Ee3d6804B9073A69B2F45C67253Cc3a5#tokentxns

· Increased loans to market makers to support liquidity

The first picture below is a snapshot of the wallet before the TGE. The second picture is the token economics, and before the TGE, there were more than 10 million tokens in circulation (which does not match the token economics). The third picture is a marketing incentive for CEX, Gate, KuCoin, Bitget need to confirm this.

It is worth noting that in the first 9 hours after the TGE, the ZKX team blocked all ZKX transfers from Starknet to the mainnet.

All transactions during this time period were from the team/market makers/CEX. About 1 million tokens were sold during this time period. The team denies this.

Changed token economics at the last minute of TGE to raise MM allocation from 4% to 8.5% because MM needed liquidity.

During the first 9 hours when only CEX/MM/team had ZKX, no idea what caused CEX price to crash. Investors were not informed of the whole process.

The worst part was giving them time to clarify. Then a month later they shut down the project citing insufficient funds and saying they have been dealing with threats (threats that came from nowhere).

The team did not explain how the $7.6 million was spent over the past three years, nor why the TGE failed.

If market makers Amber Group, Flowdesk, IMC required twice as much loan as they actually did (over-loan), then these market makers should explain.

CEX platforms CoinEx Global, Gate, KuCoin, Bitget should explain if they dumped marketing incentive tokens.

If not, then the ZKX team is lying.

The ZKX team was not transparent during the communication with the team.

$7.6 million spent in less than 3 years due to high costs (no subsidies for Starknet?) and 30+ people on the payroll? Never heard of this.

Hopefully other investors in ZKX will speak up and say that the crypto industry needs to eliminate this kind of opacity and the Starknet team needs to explain why they support this project.

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