ZKasino partial refund launched: $33 million scam case reaches a turning point

On November 10, 2025, ZKasino anonymous founder Derivatives Monke announced the initiation of partial refunds to users on social media. To date, 35% of affected addresses have received funds, distributed via zkSync Lite and zkSync Era networks. The project experienced a $33 million exit scam in April 2024, causing over 10,000 users to suffer losses as the platform forcibly converted staked ETH into locked ZKAS tokens. Although Dutch authorities made arrests and recovered a small amount of funds early in the incident, this systematic refund marks a new phase in an 18-month-long dispute. Next week’s second batch of refunds is expected to bring the total compensation rate to 75%.

Refund Mechanism and Implementation Details

The tiered refund strategy reflects practical considerations. Currently, priority is given to claims under $5,000, which account for 68% of accounts and have simple verification processes. Larger refunds require identity verification to comply with anti-money laundering regulations. The refund amount includes the principal plus an annualized compensation rate of 4.5%, which is higher than US Treasury yields at the same time but below the average DeFi market level.

zkSync dual-chain distribution enhances efficiency. Small transfers are handled on zkSync Lite, with single transaction costs controlled within $0.12; large transactions are processed on zkSync Era, leveraging its new architecture’s concurrency advantages. This design allows an average of 2,300 transactions per day, tripling the capacity of a single network. The technical team stated that, through batch proof generation technology, verifying 10,000 refunds takes only 17 minutes.

Funds tracing and distribution logic. On-chain data shows that refunds mainly come from three sources: 18,000 ETH staked in Lido (approximately $21 million in yield), 4,000 ETH reserves retained by the project, and $8 million from ZKAS token sales. This diversified funding explains why the refund rate is less than 100%—about 28% of the original losses are permanent.

Event Retrospective and Responsibility

Business model flaws are the root cause of the collapse. ZKasino’s “lossless mining” model is fundamentally contradictory: it promises users can withdraw their original ETH at any time but pledges assets long-term in Lido to earn yields. When the market crashed in May 2024, liquidity mismatch issues were fully exposed. Smart contract audits revealed that the platform only maintained 15% liquidity reserves, far below the promised 80%.

Technical deception worsened trust issues. Vitalik Buterin personally pointed out that the project’s zero-knowledge proof claims were false, as they actually used simple multi-signature schemes. On-chain analysts found that 73% of so-called zk-Rollup transactions were ultimately settled on Arbitrum, with cross-chain delays enabling arbitrage opportunities exploited by insiders. Dutch financial crime investigators discovered scripts on seized servers used to forge TVL data.

The involved personnel and fund flows are gradually clarified. Although the founders remain anonymous, law enforcement has identified three core members through on-chain analysis, with two arrested in Amsterdam. Fund tracking shows approximately $12 million transferred to Belarusian exchange Exmo, $8 million laundered through Tornado Cash, and most remaining assets still held in multi-signature wallets controlled by the project.

Regulatory Response and Law Enforcement Cooperation

Cross-border cooperation has proven effective. Dutch police and Ukraine’s cybersecurity agencies jointly froze 37 bank accounts across 18 countries. This international effort surpasses previous cases, partly thanks to the EU’s recent adoption of the Transfer of Funds Regulation (ToFR), requiring exchanges to verify customer identities.

Legal innovations address anonymity challenges. The Amsterdam court for the first time recognized the legal validity of on-chain addresses as defendants, allowing case proceedings to advance even without clear founder identities. The judgment clarified that the project’s token ZKAS constitutes an investment contract subject to securities law, laying a foundation for subsequent civil claims.

Investor protection mechanisms need improvement. The incident exposed regulatory gaps in DeFi, prompting the EU to accelerate the development of DeFi regulatory frameworks. Draft regulations propose that any project with a TVL exceeding $5 million must establish a legal entity and purchase professional liability insurance, measures that could help prevent similar events in the future.

Industry Impact and Risk Warnings

zkSync ecosystem reputation has been damaged. As a leading ZK Rollup project, zkSync’s official statements distanced themselves from the casino, but technical similarities caused confusion among ordinary users. Following the incident, zkSync’s on-chain TVL dropped by 18%. Developer communities launched “Clean Ecosystem” initiatives, delisting 37 suspected fraudulent projects.

Insurance product demand surged. Nexus Mutual’s coverage for smart contract risks increased by 300% after the incident, with annual premiums reaching 4.2%. Emerging insurance protocols like InsurAce launched specialized coverage for Rollup ecosystems, with first-day sales exceeding $8 million.

Investor education has become critical. Analyses show that 83% of affected users did not read smart contract code, and 67% relied solely on social media recommendations. Industry organizations launched a “Understand Contracts” campaign to standardize risk warnings for smart contracts, similar to traditional financial product disclosures.

Conclusion

ZKasino’s partial refunds mark a new stage in DeFi governance, demonstrating that even anonymous teams cannot completely evade responsibility under community oversight and law enforcement pressure. This case also highlights the transparency advantages of blockchain—fund flows are traceable—and provides a practical example for innovating investor protection mechanisms. As regulatory frameworks improve and technological tools advance, decentralized finance is moving from chaos toward maturity. The process involves pain but is heading in a clear direction. For industry participants, this incident serves as a reminder of the eternal balance between risk and reward. Only through enhanced technical understanding and risk awareness can one navigate the waves of innovation steadily and sustainably.