The cryptocurrency world was rocked this week by the sudden shutdown of ZKX, a Starknet-based decentralized exchange that had recently completed its token generation event. The abrupt closure left investors and market makers reeling, with many claiming they were caught completely off guard. This incident has sparked intense debate within the crypto community about transparency, communication, and the responsibilities of project founders.
Blindsided by the Shutdown
Investors and market makers involved with ZKX have taken to social media to express their shock and dismay at the sudden closure. Many claim they received absolutely no warning before the announcement, leaving them scrambling to understand the situation and protect their investments.
ArkStream Capital’s founding partner, Ye Su, didn’t mince words in a scathing post on X:
“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.”
HashKey Capital echoed these sentiments, lamenting ZKX’s failure to share crucial financial information and future plans with their VC backers.
Founder’s Defense
ZKX founder Eduard Jubany Tur has defended the decision to shut down without warning, citing security concerns:
“Pre-announcing the closure would have been a security risk since people could withdraw from the order books and someone could have exploited and put every customer’s funds at risk.”
Tur also pointed to the underperformance of the token generation event (TGE) as a contributing factor to the project’s demise. He noted that as major token holders exercised their right to cash out, the token’s value continued to plummet.
Important Statement 30.07.24
With much regret, we have to announce the discontinuation of the ZKX protocol. Despite our best efforts, we have been unable to find an economically viable path for the protocol.
(1) All markets have been delisted, positions have been closed and all…
— Eduard (@0xEduard) July 30, 2024
Market Maker’s Perspective
Amber Group, which served as both an investor and market maker for ZKX, provided insight into their involvement:
- Held 3 million ZKX tokens
- Returned half of initial 2 million token loan
- Purchased 2 million additional tokens for market-making operations
The group stated:
“Due to a lack of organic buying interest upon launch and our commitment to provide consistent liquidity, we have been net buying ZKX tokens since the listing, even as prices declined. This approach aligns with our commitment to support projects and their communities, ensuring stable market conditions, even potentially at our own expense.”
Allegations of a Rug Pull
The combination of ZKX’s millions in VC funding and the recent token generation event has led some, including blockchain investigator ZachXBT, to allege that the project may constitute a rug pull. However, Tur vehemently denies these accusations, insisting that the project simply became economically unviable to continue.
Lessons for the Crypto Community
This incident has sparked important discussions about:
- The importance of transparent communication between project teams and investors
- The need for clear financial disclosures in crypto projects
- The risks associated with early-stage crypto investments
- The balance between security concerns and investor rights
As the dust settles on this controversial shutdown, many in the crypto space are calling for improved standards and practices to prevent similar situations in the future.