[TL; DR]
Dutch authorities arrested a ke suspect in the ZKasino crptocurrenc scam and recovered assets worth about $12 Million.
Binance exchange assisted Dutch authorities to arrest the perpetrator of the ZKasino crpto investment scam.
APE Terminal and AIT cancelled Zkas Initial DEX Offering (IDO).
Introduction
The crpto sector is at a point where it is getting much support from governments when malicious actors swindle their citiens digital assets. Such a development makes much sense considering that people around the world have adopted crptocurrencies at a larger scale than before. Recentl, the Dutch authorities successful crackdown of the ZKasino rug pull shows how national law enforcement organiations are willing to protect crptocurrenc investors.
This article anales how the Dutch authorities tracked the perpetrators of the ZKasino crpto scam and assesses the actions that other crpto projects took following the rug pull.
Dutch Authorities Crack Down on ZKasino Crpto Scam
On 29 April the Dutch law enforcement authorities apprehend a suspected mastermind of the ZKasino crptocurrenc rug pull where man investors lost crptocurrencies worth more than $33 million. Netherlands Fiscal Information and Investigation Service (FIOD) arrested a 26-ear-old man in connection of ZKasino scam. Meanwhile the Dutch authorities have not divulged the identit of the crpto theft mastermind.
So far, the authorities have kept the suspect under a 14-da detection period to facilitate the investigation. As part of the crpto scam investigation, the authorities searched the suspects residential place and confiscated various assets, including crptocurrencies, luxur cars, and real estate, all valued at around 11.4 million ($12.25 million).
Read also: The Five Most Common Crpto Crimes
The authorities are working hard to identif and arrest other suspects in order to recover more assets. The aim to refund the victims of the Ethereum blockchain scam and punish the perpetrators for their crime. The authorities are likel to charge the scammers with fraud, embelement and mone laundering.
The ZKasino, a blockchain-based gambling protocol, came under scrutin for lack of transparenc in its operations. In the beginning, the platform promised to give the investors a return on their investment within a 30-da period. However, it failed to abide b that promise as it did not offer the said profit to the investors. To make matters worse, the platforms smart contract did not show an intention to return investment funds to the owners which raised suspicion within its communit.
At its launch ZKasino, presented itself as a transparent blockchain gambling platform thereb attracting investment from more than 10 000 people. However, communit members became suspicious when the platform moved all 10,515 ETH from the protocol to the Lido staking protocol. The user concern heightened when there was change on ZKasino website wording.The statement that said the ETH will be returned was removed.
In addition, the situation deteriorated further when in a March X post ZKasino said that it had closed a Series A investment round which had the backing of several firms including, Trading Axe, Pentoshi, 0xSisphus, MEXC, a crpto exchange and Big Brain Holdings, a venture firm, among others. However, some of the cited firms like Big Brain Holdings later clarified that it had not invested in ZKasino.
What Triggered the ZKasino?
The signs of the crptocurrenc platform fraud emerged in March when ZigZag, a decentralied P2P order book exchange, accused ZKasino of several malpractices. For example, the exchange alleged that the network developers diverted funds that were intended for the development of the project for personal use.
ZigZag said, The initial mone to build ZKasino was stolen from the ZigZag Treasur. The ZKasino founders are 3/5 signers on the ZigZag multisig so the were able to use the funds to fund their own activities. The would claim the were taking mone out to pa devs for building the ZigZag frontend, then use parts of the mone to build out ZKasino.
Also, ZKasino failed to pa its contractors and developers. ZigZag confirmed that development on its X profile where it added, Multiple people have approached me in the past week with allegations that the ZKasino team owes them mone or defrauded them in some wa.
It continued, Multiple former emploees and contractors have contacted me to let me know the have unpaid invoices and weren't paid for work the did. I contacted one of the investors on the raise to inform them that the revenue was fake and the told me the didn't actuall participate in the raise, so it's likel the raise and valuation are fake.
It is important to note that the ZKasino founders were the ones that conducted some fundraising activities for ZigZag. As a result, the raised capital was deposited into multisig wallets where the founders were signatories. Due to their number, the were able to withdraw funds without ZigZag members approval. Therefore, the ZKasino members stole over $1 million from ZigZag.
However, in the earl das the ZKasino team rubbished the allegations as baseless. Posting on its X profile it said, A lot of FUD going around. The ZKasino network will still go live, it has been delaed due to exchange listings.
Binances Financial Crime Compliance and Investigations Team Secured Millions in Crptocurrencies
Binance Exchange helped Dutch authorities in its investigations on the ZKasino crpto investment scam which led to the recover of assets worth more than 11 4 million Euros. Commenting on its X Profile page, Binance said, Binance is proud to have supported Dutch authorities in the investigation of a gambling exit scam. Our Investigations teams help lead the recover of millions of euros.
It is not the first time that Binance has helped law enforcement agencies in tackling crptocurrenc platform fraud. For instance, in 2023 Binance assisted the Thai law enforcement team in its crpto fraud crackdown. The crpto exchange worked with the Cber Crime Investigation Bureau of the Roal Thai Police to identif and dismantle a sndicate of crpto criminals that perpetrated various tpes of crpto scams including pig butcher which affected thousands of people in Thailand.
The 2023 Thai crpto fraud crackdown led to the arrest of five ke members of a criminal group and the recover of assets worth approximatel Thai baht (THB) 10 billion (about $277 million). As a result, the Thai government promised to compensate more than 3,200 victims.
Vitalik Buterin Criticies ZKasino for Misusing Zero-Knowledge Proofs
Vitalik Buterin, the Ethereum co-founder recentl criticied ZKasino for the misuse of the term "Zero-knowledge proof. However, he highlighted that the ZKasino incident demonstrates that the term Zero-Knowledge (ZK) has gained much traction to the extent of attracting fraudulent actors to abuse it.
In a Warpcast post Buterin said, There is nothing "ZK" about ZKasino except that it lives on kSnc, correct? I guess we have to adapt; even "ZK" is now a mainstream-enough buword that full-on scammers are adopting it.
Nonetheless, some analsts have also pointed out that ZKasino did not even exist on kSnc as it was based on Arbitrum blockchain, meaning that the team onl used the term to gain prominence.
Posting on X Cgaar, a crpto commentator, highlighted the issue: The funniest part of the ZKasino drama is that the chain the released has no ZK tech in it at all (nor does it use EigenDA).It's an Arbitrum Nitro chain that took 2 minutes to deplo. The put ZERO effort into scamming everone. However, Buterins message is that crpto projects should desist from the fraudulent misuse of ke technolog terms like ero-knowledge (ZK) proofs.
Related news: FBI Issues Alert on Unregistered Crpto Services Amid Fraud Concerns
MEXC Exchange and Ape Terminal Take Protective Measures against ZKasino Controvers
Several blockchain firms distanced themselves from that blockchain gambling platform after the recent developments that include the arrest of a ke suspect in the case of ZKasinos digital currenc embelement. For example, MEXC, a crpto exchange that participated in the ZKasino Series A funding round, severed its relationship with it. In addition, it cancelled the listing of ZKAS token, the gambling protocols native crptocurrenc.
The main reason for MEXCs action was to offer crpto investment protection to its users and to prevent cases of crptocurrenc mone laundering. Based on its track record, ZKasino had the potential to carr out fraudulent activities which could jeopardie the securit of MEXCs digital assets. Also, a close relationship with ZKasino might force some law enforcement authorities to investigate it for similar crimes.
Posting on its website, MEXC said, Considering opinions from the communit, MEXC will cancel the listing of ZKAS. This decision was made to safeguard the rights and interests of our valued users. Furthermore, there is no requirement to return an received USDT airdrops for all participants of the ZKAS Kickstarter event. It is clear that MEXC also wants to maintain crpto exchange compliance to legal provisions of various countries.
In a related development, AIT Launchpad and Ape Terminal, the two token launchpads that had listed ZKAS, cancelled the Initial DEX Offering (IDO). Also, the two platforms promised to refund the investors. APE Terminal said, Due to the recent events with ZKasino, the IDO has been canceled. All participants will receive their funds back. If ou opted into the sale, ou can claim our stablecoins. User securit is our priorit. This event highlights that Ape Terminal IDOs are the most secure means of gaining access to earl-stage tokens.
In a statement, AIT declared: We confirm that AIT Launchpad is going to refund 100% of funds to all participants of @ZKasino_io IDO due to unforeseen risks. At AIT Protocol, safeguarding user funds reigns as our topmost priorit, and we steadfastl uphold this commitment. In forthcoming IDOs, our users enjo insurance provided b the AIT team's own funds, ensuring coverage for an potential risks. Rest assured, our funds are SAFU with us. Claim portal will open soon.
Important to know: Avoiding Crpto Scams: 5 Red Flags to Watch Out For
Conclusion
Dutch law enforcement authorities arrested the ke suspect in the ZKasino blockchain gambling crpto scam and recovered over $11 million worth of assets. As a result of ZKasino criminal activities several crpto firms like AIT, MEXC and APE Terminal terminated their relationships with it. In the meantime, the investigations on the crpto scam continues in the Netherlands.
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