After years of anticipation, the star project Ethereum L2 ZKsync is finally ready to launch its token. Today, the community is buzzing with users sharing the amount of ZKsync airdrop tokens they received. As of the time of writing, ZK is trading at $0.9 on the pre-market Whales exchange. Early users received airdrops totaling 3.675 billion ZK tokens, which accounts for 17.5% of the total supply.
Users had to interact diligently with the ZKsync ecosystem to qualify for the airdrop. However, just days before the token launch, the project team took advantage of the mainnet upgrade and made off with the funds, adding another project to the “rug army” on ZKsync.
The rug project this time was GemSwap, a decentralized exchange platform on ZKsync, with the team behind it known as Gemholic.
Last year, Gemholic raised 921 ETH on ZKsync. However, due to technical differences between ZKsync’s Era network and the Ethereum mainnet at the time, Gemholic’s fundraising method on ZKsync directly copied the Ethereum contract code. Without sufficient testing for ZKsync’s architectural differences, the transfer() function in Gemholic’s contract on ZKsync incurred fees exceeding the gas limit, resulting in locked funds.
The Block’s research director, Eden Au, highlighted this issue on Twitter, stating, “A project on ZKsync raised 921 ETH ($1.7 million) through token sales, but the funds are forever trapped in the smart contract. The transfer() function works for Ethereum and other EVM chains but not for ZKsync.”
ZKsync promptly responded to this issue, proposing a solution that would address broader gas-related concerns. Gemholic also made commitments, assuring the community that they trusted the ZKsync team to rectify the situation and would refund any excess funds once the protocol was finalized.
However, the tweet can now only be viewed in web archives. After being able to extract funds from the ZKsync mainnet, Gemholic deactivated its Twitter account.
Over a year later, the value of the 921 ETH raised by Gemholic has tripled to over $3 million. On June 7th, ZKsync initiated a mainnet upgrade in version 24, introducing a feature that allows the transfer() function to be called without specifying gas, improving compatibility with Ethereum.
This adjustment presented an opportunity for the Gemholic project participants who were expecting repayment but instead witnessed another rug project on ZKsync.
Community members discovered that the day after the V2 upgrade, Gemholic withdrew 921 ETH from the project contract and bridged it to the Ethereum mainnet. Subsequently, screenshots circulating in the community showed Gemholic’s founder, Solomon, deleting all messages from the TG groups, and the Gemholic official Twitter account was also deleted, indicating that the project team had made off with the funds.
This incident sparked anger in the community, with the founder of zkMarkets, NSerec, taking to Twitter to express, “Today, $3.5 million was stolen by Gemholic, a company that has been making false promises to investors for a whole year and committed fraud once the funds were finally unlocked.”
In fact, Gemholic is not the only rug project on ZKsync, with the community even labeling ZKsync as a “rug chain.”
On April 13, 2023, the ZKsync ecosystem project SyncDex Finance was suspected of a Rug Pull. According to information on related pages, users had collectively staked over 100 ETH and 98,444.8 USDC in the project, with its official social media platforms and Discord channels closing after widespread questioning.
Less than a month later, a meme project called SHIBERA on ZKsync was also accused of a Rug Pull. The project’s official Twitter account was deactivated, and liquidity pools on SyncSwap were drained. Before the rug, SHIBERA had announced an upcoming airdrop.
One of the most memorable rug events in the community came from the well-known DeFi project Kannagi Finance on ZKsync Era. In July last year, the project’s TVL plummeted overnight from $2.13 million to just $24, with the official Twitter account quickly being deactivated.
Just two weeks ago, the ZKsync ecosystem lending platform xBank Finance also experienced a suspected Rug Pull. Reports indicated that the protocol’s TVL had nearly reached zero, with the official Twitter account being frozen and updates unavailable. xBank Finance had been one of the more active DeFi projects in the ZKsync ecosystem.
Currently, the ZKsync team has not made a clear statement on a fund recovery plan for users. For those who suffered losses in the GemSwap incident, reclaiming the transferred funds may prove to be quite challenging. In previous rug projects, ZKsync had not taken effective action to address such issues.
While the ZKsync airdrop was viewed as a “big win” by the community, these rug projects serve as a constant reminder to cryptocurrency users that the exploration of the online world entails not only “treasures” but also lurking dark risks.
