Investors and market makers in the decentralized exchange ZKX, built on the Starknet platform, were taken by surprise by the protocol’s abrupt closure. This unexpected shutdown, which follows a recent token generation event (TGE) and significant venture capital (VC) funding, has led to allegations of a potential “rug pull” from blockchain sleuth ZachXBT and others. However, ZKX founder Eduard Jubany Tur defended the decision, citing economic impracticality as the reason for halting operations.
Tur acknowledged in an initial announcement that the TGE did not meet expectations, contributing to financial difficulties. “The TGE didn’t meet expectations, and the resulting losses have led to our current situation. As major token holders exercised their right to cash out, the token’s value continued to decline,” Tur explained. He added that pre-announcing the closure would have posed a security risk, potentially allowing individuals to withdraw from the order books and exploit customer funds.
Despite Tur’s explanations, the shutdown reportedly caught investors and a major market maker off guard, leaving them without prior notice. Ye Su, founding partner of ArkStream Capital, expressed frustration on X, stating, “When ZKX shut down, we, as investors, 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.” HashKey Capital also voiced concerns, criticizing ZKX’s lack of transparency regarding its financials and future plans.
Amber Group, an investor and market maker for ZKX, disclosed holding 3 million ZKX tokens after returning half of its initial 2 million token loan and purchasing an additional 2 million tokens since the TGE. The value of ZKX’s token has plummeted by 93.6% since listing, according to CoinGecko data. Amber Group noted their commitment to maintaining liquidity, even at a potential loss, to support the project and its community.
In a follow-up statement on August 1, Tur provided further context, stating that the team processed several investor refunds before the TGE, addressing concerns from investors uncomfortable with their exposure to the ZKX token. However, the specific investors who received refunds were not disclosed.
HashKey Capital emphasized the importance of open communication, transparency, and accountability in entrepreneurship, noting that a solid reputation is crucial for securing future financing. The abrupt closure of ZKX serves as a stark reminder of the risks inherent in the volatile cryptocurrency space.
