Exposing the $30 Million Zkasino Exit Scam: How Two Dubai-Based Individuals Defrauded Thousands of Crypto Investors

Core Concepts

Two Dubai-based individuals, Elham N. and Ildar I. A., committed a premeditated fraud and stole $30 million from over 10,000 victims through their Zkasino project, an elaborate "deposit to earn" scheme that turned out to be an exit scam.

Abstract

The article details the Zkasino exit scam, where Elham N. (also known as Derivatives_Ape on Twitter) and Ildar I. A. (also known as XBT_Prometheus/lethimdev) defrauded over 10,000 victims of $30 million.
The scam began with Zkasino, a project that claimed to be building an Ethereum L2 network for gaming, announcing a "deposit to earn" scheme where users could deposit Ethereum and earn a share of the $ZKAS token. The founders promised that the deposited Ethereum would be returned to users after 30 days, but this turned out to be a lie.
The project gained traction by falsely claiming to have raised funding at a $350 million valuation and by associating with well-known crypto influencers, even though those influencers had not actually invested in the project. At the end of the 30-day period, instead of returning the Ethereum as promised, the founders "converted" the deposits into worthless $ZKAS tokens on their L2 network, which had no liquidity or functioning bridge to mainnet.
The article outlines the evidence of the scam, including the founders moving the stolen Ethereum to a new wallet and converting it to wrapped, Lido-staked Ethereum. It also provides guidance for victims on how to report the crime to authorities in Dubai and their local jurisdictions, as well as suggestions for putting pressure on the founders through social media.
The article emphasizes that there is no "controversy" or "uncertainty" around the nature of the Zkasino project - it was a clear-cut exit scam, and the founders should be held accountable for their actions.

Stats

Over $30 million was stolen from more than 10,000 victims in the Zkasino exit scam.
The founders, Elham N. and Ildar I. A., moved the stolen Ethereum to a new wallet and converted it to wrapped, Lido-staked Ethereum.
The Zkasino project claimed to have raised funding at a $350 million valuation, which was a lie used to attract more deposits.

Quotes

"As of April 23rd, 2024, Elham N., also known as Derivatives_Ape on Twitter and his co-conspirators Ildar I. A., also known as XBT_Prometheus/lethimdev and Lyor, also known as Sigman0X committed premeditated fraud and stole $30m from over 10,000 victims."
"Instead of allocating $ZKAS token to all depositors and returning the Ethereum deposited as had been agreed and announced beforehand, the team decided to 'convert' the deposited $ETH at some arbitrary USD value to entirely useless $ZKAS token on their L2 with no liquidity and, importantly, no functioning bridge to return assets to mainnet."

Key Insights Distilled From

How two Dubai-based Kids took $30m — the Zkasino Exit Scam

by at dkcrypto.medium.com 04-23-2024

https://dkcrypto.medium.com/how-two-dubai-based-kids-took-30m-the-zkasino-exit-scam-9dad124960df

Deeper Inquiries

What legal actions can victims take to recover their stolen funds, and how can they effectively coordinate their efforts across different jurisdictions

Victims of the Zkasino scam can take several legal actions to recover their stolen funds and coordinate their efforts across different jurisdictions. Firstly, they should report the crime to their local law enforcement agencies, such as the FBI or local police stations, providing all relevant evidence and details. This step is crucial as it initiates the process of contacting authorities in Dubai, where the perpetrators are believed to reside. Victims, especially those in the Netherlands and Norway, should report locally to ensure maximum pressure on Dubai authorities.
Additionally, victims can directly contact Dubai police via email at [e-mail] or physically visit a police station if feasible, emphasizing the presence of the criminals in Dubai during the scam. Pressuring platforms like Binance, where the scammers may have accounts, can also be effective in recovering funds. Reporting the scammers on social media platforms like Twitter for spam and financial fraud can limit their ability to deceive more individuals.
Furthermore, victims can join Telegram groups dedicated to coordinating efforts, sharing information, and supporting each other. By hiring lawyers and private investigators, victims can explore legal avenues to reclaim their funds and hold the perpetrators accountable. Collaborating with other victims, following legal procedures diligently, and maintaining patience are key to increasing the likelihood of a successful recovery.

How can the crypto community better identify and prevent such exit scams in the future, and what role should regulators play in protecting investors

To better identify and prevent exit scams like the Zkasino incident in the future, the crypto community must prioritize due diligence and skepticism when engaging with new projects. Key steps include conducting thorough research on project founders, verifying partnerships and endorsements, and scrutinizing project documentation for inconsistencies or misleading information. Community members should remain vigilant against promises of high returns with minimal risk, as these are often red flags for potential scams.
Regulators play a crucial role in protecting investors by enforcing transparency and accountability within the crypto space. Implementing regulations that mandate disclosure of project details, financial information, and team backgrounds can help investors make informed decisions. Regulators should also focus on monitoring and investigating suspicious activities, imposing penalties on fraudulent projects, and providing resources for victims of scams.
Educational initiatives within the crypto community can raise awareness about common scam tactics and empower individuals to recognize warning signs. Platforms and influencers should prioritize ethical practices, verify information before promotion, and promptly address any concerns raised by community members. By fostering a culture of accountability, transparency, and due diligence, the crypto community can mitigate the risks associated with exit scams and protect investors from financial harm.

What broader societal and economic implications does the Zkasino scam have, and how can we address the underlying issues that enable such fraudulent activities to occur in the first place

The Zkasino scam has broader societal and economic implications that highlight the vulnerabilities and risks present in the crypto industry. Such fraudulent activities erode trust in the market, leading to decreased investor confidence and potentially hindering the adoption of legitimate projects. The prevalence of exit scams can also attract negative attention from regulators and policymakers, prompting stricter regulations that may stifle innovation and growth within the crypto space.
Addressing the underlying issues that enable fraudulent activities involves a multi-faceted approach. Enhanced due diligence practices, transparent communication, and regulatory compliance are essential to building a more secure and trustworthy ecosystem. Collaboration between industry stakeholders, regulators, and law enforcement agencies can facilitate the swift detection and mitigation of scams, protecting investors and preserving the integrity of the market.
Educational initiatives, awareness campaigns, and community-driven efforts to expose scams and share information play a vital role in preventing future incidents. By promoting a culture of accountability, ethical conduct, and responsible investing, the crypto community can create a safer environment for participants and reduce the prevalence of fraudulent schemes. Ultimately, addressing the root causes of scams requires a collective effort to uphold standards of integrity, transparency, and investor protection within the crypto industry.