ZKX protocol, a decentralized protocol with a layer-2 solution, suspended all its services on July 29, 2024, without prior warning to its investors and market makers. The Starknet-based protocol cited that low revenue and minimal user contribution could no longer sustain its operational cost. Following the move, the company faced allegations of rug pull from its investors and funding partners. On the other hand, the protocol’s founder said there was no economically viable path to maintain the project.
ZKX Protocol’s Founder Cited Several Reasons Behind Uninformed Shutdown
Following termination, ZKX founder Eduard Jubany Tur disclosed the reason for shutting operations on his official X account (formerly Twitter). He stated that declined trading volume and minimal users participating in reward programs are the major causes of the protocol’s shutdown. Similarly, the ZKX token price dropped by 95% due to holders selling the tokens.
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While commenting on the failed operations, Tur noted in a statement:
There’s no way to sustainably support the protocol with the current value of the token either. There’s no denying the TGE didn’t meet expectations, and the resulting losses have contributed to our current situation. As major token holders exercise their right to cash out, the token’s value has continued to decline.
Partners and Investors Criticized ZKX for Shutting Operations
ZKX’s VCs and funding partners stated that the platform has blindsided its major market makers (MMM) and investors. They did not receive any prior notice of the platform’s winding down. The founder of ArkStream Capital and ZKX’s funding partner, Ye Su, criticized the platform’s performance. He added that uninformed termination has shocked many investors, including us. Su continued that the team refused to provide transparent details about its operations and considered financial mismanagement the cause of its collapse.
When ZKX shut down, as investors, we got zero heads-up. The team claimed they ran out of money, refused to provide any financial or spending details, and wouldn't communicate with us.
ZKX founder Edward Jubany Tur said in Telegram: "We are under no legal obligation to provide… https://t.co/ESa1SzxpIb
— Ye Su (@allen_su1024) August 1, 2024
Likewise, HashKey Capital (ZKX’s market maker) stated that the protocol never discussed its financial plans for the future. The Firm’s other investor, Amber Group, pressed that despite continuous efforts to maintain liquidity in the protocol, the lack of organic interest resulted in the project’s downfall. Moreover, the group added that their investors buy ZKX tokens every time their price drops. But its price continuously declined, causing huge losses to its traders. Currently, Amber Group holds around 3 million ZKX tokens.
In light of recent developments with ZKX, while we honor our contractual confidential obligations with our clients including ZKX, we’d like to share our perspective and necessary information as an investor and market maker to promote transparency and support the community. We… https://t.co/Erx038azsH
— Amber Group (@ambergroup_io) August 3, 2024
Protocols Founder Defends Allegations Against Protocol
The blockchain analyst ZachXBT also criticized the ZKX protocol and stated that it was similar to a ‘rug pull’ or scam project. It added that the TGE event and immediate price dump were clear signs of its downfall. However, Tur, defending the allegations, stated that Starknet’s ZKX protocol was aimed at providing a decentralized order book similar to DYDX. This gives DeFi protocols characteristics of trustlessness and Independence from third parties.
Moreover, he stated that the platform could not be sustained due to the underperformance of its token. He assured customers that closure would protect them until all market pairs were securely delisted. Also, the firm advises users to withdraw their funds to their self-custodial wallets and claim any pending rewards on the staking page.
Finally, he concluded:
We’re sorry we don’t have better news and deeply appreciate your unwavering support.
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