Lending protocol zkLend said in a June 25 post on X that it’ll wind down its operations and direct its remaining $200,000 treasury to a fund for customers affected by a February safety breach.
The staff mentioned the exploit “deeply eroded consumer confidence” and ZEND’s delisting from Bybit and KuCoin amplified the damaging sentiment inflicting a big decline within the capital and liquidity wanted for brand new merchandise.
Liquidity squeeze and choice to stop
Whereas zkLend assessed restoration choices, Bybit and KuCoin eliminated the ZEND token from their spot markets, sharply decreasing buying and selling depth and slicing off a path to lift recent liquidity.
The staff mentioned these constraints made a relaunch unrealistic. As a substitute, zkLend will preserve its DeFi Spring, restoration, and kSTRK portals on-line, permitting customers to unstake belongings or declare balances.
It additionally retained safety outfit zeroShadow to hint any remaining stolen cash, pledging to route future recoveries to the consumer fund.
zkLend plans to publish its refreshed, audited codebase as open-source “within the coming weeks” for any developer who needs to construct on the framework. The staff added that it’ll “stay on-line and dedicated to the restoration of stolen funds by any means obligatory,” however won’t restart its money-market operations.
The choice marks the top of zkLend’s four-year run on Starknet and formalizes the shift from rebuilding the protocol to compensating customers by the restoration pool.
Exploit drained 3,300 ETH
On Feb.12, an attacker used a precision rounding flaw in zkLend’s Starknet contracts to empty about 3,300 ETH, worth roughly $9.5 million at the time. The exploiter bridged the belongings to Ethereum and routed them by the privateness software Railgun.
zkLend provided the exploiter a ten% bounty if 90% of the funds have been returned by February 14, warning that it will pursue authorized motion if the deadline handed. The funds by no means got here again, and the protocol halted withdrawals whereas it labored with safety agency Cyvers, regulation enforcement companies, and on-chain investigators.
The investigation produced an sudden twist on April 1 when zkLend reported that the attacker misplaced 2,930 ETH to a phishing site impersonating Tornado Cash.
Blockchain analytics agency Lookonchain confirmed the loss, and the attacker despatched an on-chain message admitting the error, stating he misplaced all of the funds. He added: “I’m devastated and sorry.”
The breach left customers locked out of their deposits, and the protocol’s fame suffered consequently.
