The sudden shutdown of ZKX Protocol, a social derivatives trading platform on Starknet, has ignited accusations of a potential rug pull within the DeFi community. The announcement, made on July 30, cited financial non-viability, minimal user engagement, and declining trading volumes as the primary reasons for the closure.
Eduard Jubany Tur, founder of ZKX, explained that despite significant efforts, the protocol could not sustain its operations. “Our daily revenue could barely cover a fraction of our cloud server expenses,” he said. The team delisted all markets, closed positions, and returned funds to users, who have until the end of August to withdraw their assets.
Funding and Token Controversy
The timing of the ZKX Protocol shutdown has raised significant suspicions. The protocol recently announced a $7.6 million funding raise and conducted a Token Generation Event (TGE) for its ZKX tokens just weeks before shutting down. Crypto investigator ZachXBT accused the team of orchestrating a rug pull, tweeting, “Now they completely rug pull not even two months later after announcing a $7.6M raise and launching a token.”
Now they completely rug pull not even two months later after announcing a $7.6M raise and launching a token.
Common Starknet L pic.twitter.com/Ja4IW5x3IH
— ZachXBT (@zachxbt) July 31, 2024
ZachXBT further criticized the timing of the funding announcement, suggesting it incentivized people to buy the token only to see its value plummet. He stated, “The raise likely happened earlier than when it was announced but still the timing of the announcement definitely incentivized people to buy the token who now get completely rekt.”
In defense, Eduard Jubany Tur explained that the funds were raised over several years to support a team of 30 and cover expenses like code audits and AWS costs. He emphasized that core founders did not sell their tokens and faced numerous challenges, including community pressure, scams, and hacks. “We did our best to protect customer funds,” Tur said, noting that Binance is aware of some attackers.
Market and Community Reaction
The ZKX token has plummeted, losing 96.4% of its value from its post-launch high. The shutdown has not only affected the token’s value but also shaken trust in the DeFi sector. This event highlights the need for greater transparency and sustainable models in decentralized finance.
The ZKX Protocol shutdown has left a cloud of controversy and accusations of a rug pull, shaking the confidence of its users and investors. Despite Eduard Jubany Tur’s explanations and the return of user funds, the timing of the funding announcement and TGE raises serious questions. As the community processes this event, it underscores the need for transparency and accountability in project operations. The fallout from ZKX’s closure serves as a critical lesson for both investors and developers in maintaining trust and integrity.
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