ZKX shutdown sparks investor outrage, Amber Group responds

The sudden shutdown of ZKX, a social derivatives trading platform on the Starknet layer-2 network, has drawn the ire of both investors and market makers.

The closure, announced by founder Eduard Jubany Tur on July 30, cited the project’s lack of economic viability as the primary reason. However, the suddenness and lack of communication that accompanied the decision caught many stakeholders off guard.

Amber Group shares its perspective

Amber Group, a major market maker for ZKX (ZKX), expressed shock at the platform’s sudden halt in operations. The company recently took to X to share its perspective and condemned ZKX’s lack of communication.

In light of recent developments regarding ZKX, we would like to share our perspective and the necessary information as an investor and market maker to promote transparency and support the community while fulfilling our contractual confidentiality obligations with our customers, including ZKX. We… https://t.co/Erx038azsH

— Amber Group (@ambergroup_io) August 3, 2024

The company revealed in its X post that it was involved in providing liquidity for ZKX’s token production event on June 19. To facilitate this, Amber Group received a loan of 2 million ZKX tokens at no additional cost.

Amber claimed that despite the lack of organic buying interest, he continued to purchase ZKX tokens to maintain liquidity even as prices fell.

However, on June 24, ZKX requested the return of 1 million tokens to reduce circulation and increase community trust. Amber Group says it complied, thus reducing its loan to 1 million tokens.

Despite all the difficulties, by the time ZKX announced its closure, Amber had accumulated a total of 3 million ZKX tokens by raising an additional 2 million tokens from the open market to ensure consistent liquidity.

Amber Group emphasized the importance of transparency in its post, stating that ZKX’s lack of communication throughout the process sets a worrying precedent for the industry.

HashKey criticizes lack of transparency

Other investors have expressed similar sentiments to Amber’s, with HashKey Capital, for example, criticizing ZKX for failing to provide transparent financial details and operational plans.

The venture capital firm also posted a statement condemning the erosion of trust and confidence caused by ZKX’s insensitive communication and Tur’s mismanagement of the situation.

Like other investors, we have experienced a lack of transparency and accountability. @zkxprotokol in disclosing their financial position, fund allocations and operational plans.

Also, their reluctance to communicate was disappointing and the founder… https://t.co/4EyaUdEp06

— HashKey Capital (@HashKey_Capital) August 2, 2024

Another investor, Ye Su, expressed disappointment at the lack of any prior notification, saying that the ZKX team refused to provide financial or expense details.

To add fuel to the fire, renowned blockchain researcher ZachXBT also expressed his feelings about the ZKX disaster, suggesting that it was all a hoax.

Despite the backlash, Henri, the developer relations director at the Starknet Foundation, defended ZKX, saying the team has made significant contributions to the ecosystem and that it is unfair to label them as scammers.

Henri suggested that ZKX’s sudden closure was due to bad decisions rather than malicious intent as ZachXBT claimed.

ZKX founder offers explanation

Tur continued his defense by sharing a detailed X-post regarding the allegations.

Tur announced that all user funds previously held in the project have been returned, and more than 95 percent of the withdrawals have been completed.

New Statement

There have been numerous statements from many sides, we wanted to address some of the concerns such as the use of funds, TGE performance etc:

Current Status of Sunset:

All user funds have been returned. As of today, more than 95%…

— Eduard (@0xEduard) August 1, 2024

He also admitted that the ZKX team underestimated operational costs, including maintenance of the layer 3 blockchain and market-making expenses, which significantly exceed revenue.

Tur detailed the financial difficulties and efforts to maintain liquidity, highlighting that the project’s total fundraising of $7.6 million over four years was not enough to sustain operations.

The ZKX founder also described the challenges his company faced during the token creation event, claiming that low demand and significant selling pressure contributed to the token’s poor performance.

He emphasised that the team acted in good faith, tried to balance the interests of all stakeholders and explored alternatives to make the project sustainable.