The Kinto Network, an Ethereum layer-2 blockchain, announced it will wind down operations by September 30, sending its governance token Kinto (K) crashing more than 81% in a single day.
Hack and Financial Struggles Force Shutdown
Kinto was hit by a $1.6 million exploit in July, when attackers drained 577 ETH through a vulnerability in the ERC-1967 Proxy standard, a codebase widely used to upgrade smart contracts. While the project initially raised $1 million in debt to relaunch its modular exchange, worsening market conditions and failed fundraising left the team with no path forward.
“Every day that we go on, the funds dwindle further. We’ve operated without salaries since July, and after the last financing path fell through, we have one responsible choice left: shut down cleanly and protect users/lenders as best as possible,” the team said in a statement.
High Yields Raised Sustainability Concerns
Industry observers noted that Kinto’s high annual percentage yields (APYs) contributed to its fragile state. At one point, the protocol offered 130% yields in USDC staking, one of the highest in DeFi, even after its hack — raising questions about long-term sustainability.
Asset Recovery and User Compensation
The team outlined a recovery plan for lenders and victims:
- $800,000 in Uniswap liquidity will be distributed to “Phoenix” lenders, who are expected to recover 76% of their principal.
- A goodwill grant will provide $1,100 per affected address, with founder Ramon Recuero pledging $130,000 of personal funds toward compensation.
- Users must withdraw assets by Sept. 30, after which claims will be handled via a perpetual claim contract.
Following the announcement, Kinto’s token (K) dropped 81.4% to $0.46, leaving its market cap just above $1 million, according to CoinGecko. The token had launched only four months ago in April and reached a peak valuation of $14.5 million on Aug. 14.
Another Failed Venture for Recuero
This marks founder Ramon Recuero’s second failed crypto project, following Babylon Finance, which shut down in 2022 after a $3.4 million hack. In both cases, hacks and market sentiment proved too damaging to overcome.
Disclaimer
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