Introduction:
The ZKasino platform has recently gained a lot of attention. After launching the bridge to earn platform token ZKAS by bridging ETH in March 2024, the platform attracted over 10,000 participants and raised over $33 million worth of Ethereum.
However, in less than a month, ZKasino has gone from being a star project valued at $350 million in Series A funding to a suspected scam platform.
01. ZKasino Platform Caught in the Storm of Running Away
According to the ZKasino official website and official Twitter, ZKasino is a decentralized gambling game platform.
On March 16, 2024, ZKasino announced that the ZKasino bridge is about to go live, and participants in the bridge funding activity can receive ZKAS token rewards. Subsequently, ZKasino repeatedly stated that users who deposit funds earlier can receive more token rewards and introduced a commission mechanism to encourage users to invite new users to join. On March 19, ZKasino announced the completion of a $350 million Series A financing. On April 5, ZKasino tweeted that the bridge funds currently deposited have exceeded 10,000 ETH.
On April 20, ZKasino removed the phrase "Ethereum will be returned and can be cross-chained back" from the "Bridge funds" section of its official website. Users reacted that they are currently unable to withdraw funds. On the same day, MEXC exchange announced the cancellation of ZKasino (ZKAS) listing. MEXC staff responded to the suspicion of ZKasino running away, stating that we are just one of the investors, and the behavior of the project party has nothing to do with us. As investors, we are also victims (this is also one of the important reasons why many people believe that the ZKasino project party has run away).
On April 21, ZKasino transferred the Ethereum deposited by users into ZKasino to a multi-signature address, and subsequently deposited it into Lido.
As of the publication date, ZKasino has not mentioned the whereabouts of the funds previously deposited by users or any subsequent arrangements. At the same time, the project's white paper not only secretly changed the user's pledged assets to a donation model but also forced an "IDO," converting all the ETH pledged by users into its own platform token ZKAS.
02. If ZKasino Platform Runs Away, Can Domestic Investors Protect Their Rights?
It is extremely difficult to protect rights in such cases.
People in the cryptocurrency circle should be familiar with Notice 924. In September 2021, ten government departments issued the "Notice on Further Preventing and Handling Risks of Speculation in Virtual Currency Trading," which mentioned, "Participating in virtual currency investment and trading activities carries legal risks. Any legal person, unincorporated organization, or natural person engaging in virtual currency and related derivative investment activities that violate public order and good customs shall have their relevant civil legal actions deemed invalid, and they shall bear the resulting losses themselves." "Severely crack down on illegal business operations, financial fraud, money laundering, gambling, and illegal fundraising, pyramid schemes, and other criminal activities using virtual currency as a lure."
Combining the principles of personal jurisdiction and territorial jurisdiction in China's criminal laws, it is known that since virtual currency-related business activities are defined as illegal financial activities in China, (1) if Chinese citizens engage in such business or if the related illegal activities or results occur domestically, the Chinese judicial authorities have jurisdiction. (2) If individuals suffer losses due to investing in virtual currency, the relevant civil legal actions are invalid, and the risk is borne by themselves.
Therefore, to seek protection, the following issues need to be addressed:
The premise of seeking protection is that the platform is suspected of criminal activities
Since personal investment in virtual currency trading is not protected by law and civil legal actions are invalid, the premise for the protection of personal property rights may be that it involves a criminal case. Although the behavior of the ZKasino platform has angered many investors, with the Chinese rights protection group alone exceeding 2,000 people, whether there is sufficient evidence to prove that the platform's behavior constitutes fraud or illegal fundraising requires preliminary evidence from investors and a determination by judicial authorities. Moreover, the platform's current situation is ambiguous, it seems like it has run away, but it hasn't? However, ZKasino has not yet expressed its stance on refund matters for users.
Cross-border prosecution is difficult
Even if the ZKasino platform is indeed suspected of criminal activities, because it is a foreign platform and it is not clear whether the specific members of the project team are Chinese, not every foreign project that runs away will be under the jurisdiction of domestic judicial authorities, despite previous cases. For example, a pyramid scheme group claiming to be engaged in virtual currency mining investment caused hundreds of billions of losses to Chinese citizens, and the ultimate controller was arrested with the assistance of international criminal justice and then extradited back to China. However, not every foreign project that runs away will be under the jurisdiction of domestic judicial authorities.
Although China has jurisdiction, it does not have enforcement power. Cross-border prosecution involves complex factors such as the amount of funds involved in the case, social harm, legal consequences, whether China has signed an extradition treaty with other countries, and international law enforcement cooperation and communication. This requires communication and negotiation between countries.
03. What Legal Risks Do Users Face When Playing Web3 Gambling Games?
ZKasino is a gambling game platform, with probability-based games as the main gameplay. According to the law, acting as an agent for such gambling websites is considered an accomplice to opening a gambling house.
In 2010, the "Opinions on Several Issues Concerning the Application of Law in Handling Criminal Cases of Online Gambling" stated:
- Regarding the identification and punishment of joint crimes of opening gambling houses online
Providing the following services or assistance to a gambling website, knowing that it is a gambling website, constitutes a joint crime of opening a gambling house and shall be punished in accordance with the provisions of Article 303, paragraph 2 of the Criminal Law: (1) Providing services such as advertising, developing members, etc., for a gambling website… and charging service fees of more than 20,000 yuan.
In 2020, the "Opinions on Several Issues Concerning the Handling of Cross-border Gambling Criminal Cases" stated:
Regarding the identification of joint crimes of cross-border gambling
Acting as an agent for gambling websites and applications and developing players, members, and downlines.
Lawyer Shao handled a case last year in which the party acted as an agent for a foreign Web3 gambling platform, which had similar game mechanisms to ZKasino, both involving simple probability-based games (e.g., rock-paper-scissors, coin tossing). The party was ultimately convicted of opening a gambling house, and the users (gamblers) under the party were subject to administrative detention and fines.
04. Conclusion
The ZKasino rights protection group has quickly grown to over 2,000 people in just a few days, and related users on Twitter are constantly seeking help.
In the magical world of cryptocurrency, running away is easy, but protecting rights is difficult, and it has long been commonplace. For retail investors, when investing in Web3 projects, they must carefully discern, make rational judgments, and invest cautiously.
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