Binance’s Ambiguous Role in the ZKasino Crypto Gambling Scam Unveiled

The Rug Pull scam ZKasino and the role of Binance explained
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The Dutch authorities, allegedly with the aid of Binance’s Financial Crime Compliance and Investigations Team, have arrested the 26-year-old Dutch national Elham Nourzai, who was allegedly involved in the ZKasino crypto gambling platform scam. Following respective investigations, the Fiscal Information and Investigation Service (FIOD) announced the arrest and seizure of over €11.4 million in assets, including real estate, luxury vehicles, and various cryptocurrencies.

This Dutch arrest stemmed from investigations initiated due to allegations that ZKasino was operating a large-scale rug pull scam. ZKasino presented itself as a legitimate gambling platform, promising investors a return of their funds within 30 days. However, the smart contract underlying the platform was designed in such a way that it never intended to fulfill these promises, leading to substantial financial losses for investors. The total amount lost by investors is estimated to be at least $33 million.

When writing this article, the ZKasino website (Zkasino.io) was still up and running. In a post on X (formerly Twitter), Zkasino announced the closing of a $350 million Series A funding and named the crypto exchange MEXC, among others, as an investor.

What is a Rug Pull scam? A rug pull in the cryptocurrency context occurs when developers of a crypto project abruptly terminate the project and sell off their significant holdings of the project’s tokens. This action is akin to liquidating shares in a company. Typically, these developers also hold a substantial percentage of the total tokens, which they had distributed in exchange for investments to fund the project. When they suddenly dump their tokens on the market, it causes the token’s value to crash dramatically. Consequently, the developers abscond with the proceeds from the sale, leaving investors with tokens that are significantly devalued or essentially worthless. This deceptive practice results in substantial financial losses for investors and undermines trust in the crypto market.

Binance’s role in this investigation was crucial but dual-faceted. On the one hand, their on-chain investigations team claims that it has played a pivotal role in identifying and tracking down the suspect. Using a combination of blockchain analysis and open-source intelligence, Binance was able to pinpoint the individuals behind the fraudulent contracts and subsequently alerted Dutch law enforcement, leading to the arrest and seizure of assets. Additionally, Binance froze millions of dollars worth of crypto-related to the scam, aiding the authorities in mitigating further damage.

On the other hand, this incident has cast a spotlight on Binance’s operations, revealing a potential double standard in its business practices. Despite their proactive stance in this particular case, Binance is known as one of the most favored crypto payment processors in the illegal online gambling sector. This popularity is attributed in part to the platform’s relaxed KYC (Know Your Customer) checks for merchants. Such practices raise questions about the integrity and consistency of Binance’s regulatory compliance efforts.

While Binance‘s involvement in the resolution of this scam demonstrates the potential for crypto exchanges to assist in law enforcement efforts, it also highlights the need for more stringent regulatory practices to prevent the facilitation of illegal activities in the first place with proper KYC procedures.

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