Four months after a major security breach, zkLend is shutting down and allocating $200,000 in remaining funds to compensate users.
ZkLend, a decentralized money-market protocol built on StarkNet and backed by notorious hedge fund Three Arrows Capital, is shutting down operations four months after suffering an exploit that drained around $9.6 million in user funds.
In a June 25 post, the zkLend team stated that the February 2025 hack had “deeply eroded user confidence” and that recent delistings of its token, ZEND, by multiple cryptocurrency exchanges, including Bybit and KuCoin, further “constrained token liquidity and accessibility.” The team said it would use the remaining $200,000 in its treasury to compensate users rather than attempt a relaunch.
In February, zkLend offered the attacker a 10% white-hat bounty and promised not to take legal action if the remaining 3,300 ETH was returned by Feb. 14. The team had warned that it would escalate the matter with law enforcement if the deadline passed without a resolution.
Hacker Gets Scammed
In April, the attacker contacted zkLend, claiming they had lost most of the stolen funds after using a fake Tornado Cash website. In a message sent through Etherscan on March 31, the hacker stated that they had mistakenly used a phishing site and subsequently lost 2,930 ETH while attempting to transfer the funds.
The closure announcement did not specify whether the team still plans to pursue legal action against the hacker, but it mentioned that the team continues to work with the security firm ZeroShadow to recover the stolen assets.
The zkLend team told The Defiant that they have been collaborating with law enforcement and exchanges since the exploit occurred. Regarding the hacker’s claim that they lost most of the stolen ETH to a phishing scam, the team said they “cannot rule out any possibility of the Tornado Cash incident, and have not found any conclusive evidence one way or another.”
“Regardless, we will continue to work with ZeroShadow, and should there be any funds recouped in the process, it will go back to users through the recovery portal, which continues to operate after our closure,” they added.
ZkLend was launched with backing from Three Arrows Capital, StarkWare, and Delphi Digital. It raised $5 million in 2022 and had planned to offer both retail-facing and institutional lending services through two products, Artemis and Apollo.
