Original | Odaily Planet Daily (@OdailyChina)
The "Rug pull" ZKasino, which once absconded with over 10,000 ETH, has once again returned to the public eye. Unfortunately, the project's promised refunds are still nowhere in sight, and instead, they have used user funds to go long on ETH, successfully making millions of dollars in profit.
In a previous article titled “Unveiling ZKasino: From a Valuation of $350 Million to a Soft Exit with 10,000 ETH”, we provided a detailed introduction to the project. Now, there have been new developments, marking a phase in this ongoing situation.
Odaily Planet Daily will track the recent status of ZKasino in this article for readers' reference.
Rug pull reappears: This time choosing to go against the trend and go long on ETH
As a previous "absconding with funds" Rug pull, the ZKasino project team issued a statement at the end of May stating that they would refund users; however, by August, the 10,515 ETH deposited by users still remained in the following two addresses:
0x42dc91caa486a1cbf921a8009404a590414285a3 (5271 ETH)
0x0ab4a19ab20bd1dde51a5d302721fcc30f34094d (5266 ETH)
Previously, ZKasino had deposited this asset into Lido to earn interest and redeemed 10,536 stETH (worth approximately $31.56 million) back into ETH in mid-May, earning 22 ETH in interest over 25 days.
As the victims waited day after day, over three months later, ZKasino finally took action on this asset again. This time, they chose to go long on ETH.
A 20-day "Long ETH Gamble"
On November 23, on-chain analyst Yu Jin monitored that ZKasino misappropriated user assets to go long on ETH on-chain, depositing 5,270 ETH into Aave as collateral to borrow 11.589 million DAI, then buying 3,500 ETH.
Later that day, the Rug pull project team borrowed another 8 million DAI to buy 2,301 ETH, having cumulatively borrowed 19.589 million DAI from Aave to purchase 5,801 ETH at an average price of $3,377.
On November 26, ZKasino continued to leverage, depositing another 5,265 ETH from a different address into Aave as collateral to borrow 12.348 million DAI, purchasing 3,515 ETH. At that time, all user assets totaling 10,535 ETH were deposited into Aave as margin, ultimately borrowing a total of 31.937 million DAI to buy 9,316 ETH. It is understood that the average price of the leveraged ETH purchased was $3,428.
Moreover, despite the market's pessimistic outlook on ETH's price at the time, the ZKasino project team clearly held an opposing view and demonstrated their bullish stance on ETH through their actions.
On the 26th, the ZKasino project team continued to increase their position, borrowing 12.38 million DAI from Aave to purchase 3,723 ETH through a circular loan method. In summary, the project used the 10,535 ETH belonging to users as the base margin, cumulatively borrowing 31.937 million DAI to purchase a total of 13,040 ETH, with an average cost of approximately $3,402, at that time showing a floating loss.
Just when everyone thought ZKasino was playing with fire, the price of ETH quietly began to change.
ETH price trend
On November 27, the price of ETH briefly fell below $3,300, with OKX market data showing that ETH hit a low of around $3,250 that day; however, shortly after, within just one day, the price of ETH quickly rebounded and swiftly broke through $3,600, approaching $3,700 at one point.
On November 28, on-chain analyst Yu Jin monitored that the ZKasino project team continued to borrow 9.36 million DAI to purchase 2,603 ETH; they had cumulatively borrowed 53.77 million DAI to buy 15,645 ETH, leveraging to go long on ETH, with an average price of $3,437 for the ETH purchased through leverage. At that time, with the significant rise in ETH, the ZKasino project team had a floating profit of $3.22 million from using users' ETH as margin to leverage long.
In the end, the Rug pull ZKasino did not face the liquidation that many users expected; instead, they successfully exited the situation.
Today, the ZKasino project team chose to end this long ETH leverage, selling the 15,005 ETH purchased through leverage and repaying the loan, earning a profit of 651.5 ETH ($2.37 million); subsequently, the 10,535 ETH belonging to users and the long profits totaling 11,186.5 ETH ($40.75 million) were dispersed and transferred to nine addresses, leaving the event once again in a deadlock.
This has led to a series of questions: Do Rug pulls really always profit?
The Secret to Rug Pulls Making Money: Trading Market Attention for Profit
After this incident, we can clearly see that making money through Rug pulls is a one-sided "profit harvesting" operation, primarily due to:
The liquidity harvesting of Rug pulls is the first link. Just like many Rug pulls during the previous meme craze that relied on "donation harvesting," ZKasino is also a notorious member of the liquidity-harvesting group. Others include VT on the BNB chain and Maji (Huang Licheng) on the Solana chain;
The staking interest harvesting of Rug pulls is the second link. After completing the task of "user principal as the source of profit," the second step for these Rug pulls to profit is to rely on staking interest protocols within different ecosystems. ZKasino chose Lido, while Maji previously chose the BlazeStake staking protocol in the Solana ecosystem.
The leveraged trading harvesting of Rug pulls is the third link. This behavior carries greater risk, but often yields higher returns. ZKasino's leveraged long on ETH is a prime example, achieving over 6% in coin-based returns in just about 20 days with over 10,000 ETH, despite some pullback from the peak, it can still be considered a good exit.
Moreover, since Rug pulls usually involve a wide range of participants and have a broad impact, they naturally become a "market attention focal point," which to some extent also becomes a significant factor influencing market price trends. ZKasino's successful leveraged long position benefited, to some extent, from the market's attention resources being tilted towards this event.
In light of this, perhaps one of the market's future indicators will also include the movements of Rug pull funds.
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