Kinto to Shut Down After Exploit Drains $1.9M From Reserves

Kinto, an Ethereum Layer-2 project known for its KYC-compliant modular exchange, will officially shut down on September 30. The decision follows a July 10 exploit that drained approximately 577 ETH (worth $1.9 million at the time) from its lending pools. The incident left the team unable to recover operationally or secure new funding.

The Exploit and Its Fallout

The attacker exploited a vulnerability in the ERC-1967 Proxy standard, code widely used in upgradeable smart contracts. They minted 110,000 fake Kinto tokens on Arbitrum and dumped them via Uniswap and Morpho, draining funds from both liquidity pools and lending vaults.

Though security researchers flagged the issue and warned other DeFi platforms, Kinto was attacked just hours after the disclosure. The K token immediately plummeted by over 95%, triggering a sharp collapse in user confidence.

To stay afloat, Kinto initiated a $1 million debt raise through the “Phoenix Program,” issuing a new token and resuming DeFi operations. However, with debt mounting, investor trust evaporated. The team has not received salaries since July. All subsequent fundraising efforts failed and finally the Kinto team has decided to shut down.

Shutdown Plan and Reimbursement Details

In a public statement, founder Ramón Recuero confirmed that the project will close operations in a transparent and responsible manner. About $800,000 of remaining assets have been consolidated into a foundation-controlled safe.

Phoenix lenders will receive 76% of their principal back. Victims of the exploit on Morpho are eligible for a goodwill grant of up to $1,100 per address, funded personally by Recuero with $55,000 of his own capital.

Withdrawals from the Layer-2 will remain open until September 30. After that, users can claim balances from an Ethereum mainnet contract, expected to go live in October. Kinto will also distribute a scheduled ERA airdrop on October 15.

A Broader Warning for DeFi

The Kinto shutdown adds to a growing list of DeFi protocols that have struggled or collapsed due to smart contract exploits. The incident has sparked fresh calls for stronger audit practices, more conservative upgrade paths, and sustainable on-chain business models.

Recuero, who also helped reimburse victims of the Rari Protocol hack in 2022, emphasized the importance of orderly exits. “We won’t vanish into zombie mode,” he said. “We’ll shut down cleanly and keep fighting for future recoveries.”

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KOLsMediaCommunity

Kinto is full of terrible and worst experiences. First their presale disappointed, launched at a lower price, and the airdrop claim had trouble for hours. Price kept going down while people still couldn’t claim their allocations. Then their protocol got hacked with 577 ETH https://t.co/acAkCJqfY8

satyaxbt

@satyaXBT

1 day ago