ZKSync in the Crisis Vortex: Developer Matter Labs Sued for Stealing Core Technology, Coin Theft Scandal and Ecosystem Contraction Under Pressure

Author: Nancy, PANews

One wave has not settled, yet another arises. Recently, the L2 project ZKsync has triggered a trust crisis due to a hacking incident involving its airdrop distribution contract, and its developer Matter Labs is now embroiled in legal disputes and public opinion turmoil due to allegations of intellectual property theft.

Matter Labs is being sued by BANKEX, accused of misappropriating technology and taking away the core development team

On March 19 this year, Igor Khmel, the CEO of the digital asset banking platform BANKEX, and its affiliated entities filed a lawsuit in the New York State Supreme Court, accusing former employees Alexandr Vlasov and Petr Korolev of embezzling BANKEX's core technology during their tenure, privately founding the competing company Matter Labs, and obtaining over $450 million in venture capital as a result.

According to LinkedIn data, Vlasov is currently the head of R&D at Matter Labs, serving for 6 years and 8 months, during which he is mainly responsible for preparing for the release of Plasma on the Ethereum mainnet and developing a GPU-based zkSNARK prover for the next-generation Plasma protocol. Prior to that, Vlasov was the Principal Research Scientist at the BANKEX Foundation from March 2018 to January 2019, where he led the implementation of Plasma and developed a suite of tools including backend systems and smart contracts to support the actual operation of Plasma. Another key figure, Korolev, is currently the founder of blockchain security company OXORIO, having served as co-founder and head of operations at Matter Labs from August 2018 to January 2020. Prior to joining Matter Labs, Korolev was the CEO and co-founder of the BANKEX Foundation, where he led the establishment of the organization's R&D ecosystem, where Plasma R&D was one of the four core projects he participated in and promoted.

The complaint reveals that as early as 2017, Ethereum co-founder Vitalik Buterin sought out BANKEX to commission the development of software related to "Plasma," which was then seen as a key technology to enhance Ethereum's scalability. At that time, BANKEX employees Vlasov and Korolev led the specific development of the project, with BANKEX providing funding, manpower, and community resource support. The related成果 were open-sourced on the GitHub platform and showcased at several developer conferences, receiving public recognition from Vitalik.

However, according to the court documents, in February 2018, while still an employee of BANKEX, Vlasov created a new account on GitHub named "Matter Labs" and uploaded a code repository that was almost identical to the existing "Plasma Contract" of BANKEX, without attributing BANKEX and not complying with the original Apache/MIT license requirements. Vlasov later also released the "Web3Swift Library" under his own name, which constituted a clear conflict of interest and violation of intellectual property rights.

On August 13, 2018, Vlasov and Korolev suddenly announced their resignation without prior notice or arrangement for a technical handover, and within a week, they publicly released the Matter Labs white paper on GitHub, detailing the Plasma scalability architecture while deliberately avoiding mentioning that the technology originated from BANKEX. The white paper not only reused the code structure and algorithm design previously submitted by BANKEX but also referenced their achievements at the "ETHWaterloo Hackathon" with Vitalik's recognition, without clarifying that these achievements were obtained under the name of BANKEX. Additionally, the white paper repackaged the Plasma technology demo, illustrations, and algorithm details that BANKEX had previously made public on GitHub as original results of Matter Labs.

More seriously, after the two left, they quickly lured key engineers from BANKEX to collectively "jump ship". The initial technical team of Matter Labs was almost entirely composed of former core members of BANKEX, including the foundation's COO Sergey Korolev (brother of Korolev), Anton Nezlobin, Georgy Fesenko, and senior engineers Konstantin Panarin among others. Even on the GitHub project page, the official BANKEX project was changed to indicate: "web3swift development has been frozen, welcome to use [matter-labs/web3swift]", openly leveraging BANKEX's influence for user diversion.

With the loss of technology and key team members, BANKEX quickly fell into difficulties. In mid-2018, the company's valuation reached as high as $530 million, with annual revenue of $6.5 million, but by the end of the year it shrank to $200 million. Moreover, due to the depletion of core technology and team members, it was unable to secure funding, and BANKEX completely ceased operations in 2019. Khmel had once sought emergency funding from the Ethereum Foundation through Vitalik, but received no response. In the list of the fifth round of funding announced by the Ethereum Foundation in February 2019, Matter Labs was at the top, while BANKEX was completely excluded.

The complaint also points out that Alex Gluchowski, CEO of Matter Labs, Chris Burniske, partner and former director of Placeholder, as well as the investment firms Dragonfly and Placeholder Capital are also suspected of knowingly or participating in the misappropriation of the technology, becoming one of the defendants.

In response to the allegations, Matter Labs stated to Coindesk that these accusations are unfounded. The crux of the lawsuit claims that Matter Labs built ZKsync based on code developed by BANKEX, which is completely untrue. ZKsync is original technology and is not based on or derived from any code of BANKEX. We are confident in the integrity of our work and look forward to clarifying this baseless accusation in court after receiving a formal subpoena.

Reputation has been severely damaged,** ecological activity has significantly shrunk**

In fact, this is not the first time Matter Labs has faced accusations of "plagiarism." As early as 2023, Polygon, also part of the ZK ecosystem, publicly criticized zkSync for copying its open-source code without permission and using misleading language in its release. In response, zkSync stated that only about 5% of the Boojum module code is based on Polygon's Plonky2 library, and the source is clearly indicated on GitHub.

Moreover, in May last year, Matter Labs faced a joint boycott from ZK ecosystem projects due to its submission of the "ZK trademark application". Although it ultimately withdrew the application, its founder Alex claimed to oppose the concept of "intellectual property", stating that everything he created is released to the public under a free open-source license. This statement intensified external criticism of its "open-source abuse".

These controversies have taken a toll on ZKsync's reputation. However, to add insult to injury, ZKsync has recently fallen into another crisis of confidence due to the theft. On April 15, the ZKsync official team announced that the administrator account of its airdrop distribution contract had been compromised. The attackers minted about 111 million unclaimed ZK tokens from the airdrop contract by calling the sweepUnclaimed() function. This incident is limited to the airdrop distribution contract, and the attacker cannot carry out further attacks through this method. According to Alex, the incident was caused by an operator whose key was compromised, but the project code was not leaked. Nearly a week later, ZKSync posted again that it was willing to offer a 10% bounty in exchange for the return of stolen funds for a period of 72 hours. If the hacker completes the return within the time limit, the incident will be publicly confirmed to be resolved; Failure to do so will result in a criminal investigation and referral to law enforcement.

Now, ZK's star project, which was once pinned on high hopes, is also facing market challenges. Judging from the data, the ecological activity of zkSync has declined significantly. DeFiLlama data shows that ZKsync's daily revenue and daily fees have plummeted from hundreds of thousands of dollars to less than $10,000 for a long time since June last year, and even 0 for many consecutive days recently.

At the same time, Artemis data also shows that as of April 21, the number of daily active addresses for ZKsync plummeted from a peak of 445,000 to just 9,200, a drop of over 97%. During the same period, the daily transaction count also fell from a historical high of 5.2 million transactions to 50,700 transactions, and the trading volume dropped from over $770 million at its peak to the current $3.32 million, a decline of over 95%.

From technical infringement allegations to the theft of airdrop distribution contracts, and a dramatic shrinkage of the ecosystem, zkSync is now struggling in a trust crisis and fierce market competition.

Related reading: zkSync developers are embroiled in a trademark dispute over "ZK," facing a joint boycott from multiple crypto leaders.