The sudden shutdown of ZKX, a social derivatives trading platform on the Starknet layer-2 network, has sparked significant controversy among investors and market makers. The closure, announced on July 30 by founder Eduard Jubany Tur, cited a lack of economic feasibility as the main reason. However, the abruptness and lack of communication left many stakeholders blindsided.

Amber Group Shares Perspective

Amber Group, a key market maker for ZKX, expressed shock at the sudden cessation of the platform’s activities. The company took to social media to share its perspective, criticizing the lack of communication from ZKX.

In light of recent developments with ZKX, while we honor our contractual obligations, we’d like to share our perspective and necessary information as an investor and market maker to promote transparency and support the community.

In their post, Amber Group revealed it had been involved in ensuring liquidity for ZKX’s token generation event on June 19. To facilitate this, Amber Group received a loan of 2 million ZKX tokens, with no additional fees attached. Despite a lack of organic buying interest, Amber continued to purchase ZKX tokens to maintain liquidity, even as prices declined.

However, on June 24, ZKX requested the return of 1 million tokens to reduce circulation and bolster community confidence. Amber Group complied, reducing its loan to 1 million tokens. By the time ZKX announced its shutdown, Amber had accumulated a total of 3 million ZKX tokens, having purchased an additional 2 million from the open market to provide consistent liquidity.

Amber Group emphasized the importance of transparency, noting that the lack of communication from ZKX during the entire process set a concerning precedent for the industry.

Investor Reactions

Other investors have echoed sentiments similar to Amber’s. HashKey Capital criticized ZKX for its failure to provide transparent financial details and operational plans. The venture capital firm posted on social media, lamenting the erosion of trust and confidence due to ZKX’s unresponsive communication and mishandling of the situation.

Much like other investors, we experienced a lack of transparency and accountability from ZKX in disclosing their financials, allocation of funds, and operational plans.

Ye Su, another investor, also voiced frustration over the lack of heads-up before the shutdown, stating that the ZKX team refused to provide financial or spending details.

Renowned blockchain investigator ZachXBT suggested that the ZKX debacle might be a rug pull, adding fuel to the fire:

Now they completely rug pull not even two months later after announcing a $7.6M raise and launching a token.

ZKX Founder Offers Clarification

Adding to the discourse, Eduard Jubany Tur defended his position in a detailed post addressing the allegations. Tur clarified that all user funds previously held by the project had been returned, with more than 95% of withdrawals completed.

There have been many statements being issued by multiple parties; we wanted to address some of these concerns including the usage of funds, TGE performance, and so forth.

Tur acknowledged the ZKX team’s underestimation of operational costs, including maintaining a layer-3 blockchain and market-making expenses, which significantly exceeded revenue. He detailed the financial strains and efforts to maintain liquidity, highlighting that the project’s cumulative fundraising of $7.6 million over four years was not sufficient to sustain operations.

Additionally, Tur explained the challenges faced during the company’s token-generating event, including low demand and significant selling pressure, which he claimed contributed to the token’s poor performance. He emphasized that the team acted in good faith, attempting to balance the interests of all stakeholders and exploring alternatives to sustain the project.

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