Kinto Shuts Down After $1.9M Hack, Project Token Price Drops 85%

Kinto, an Ethereum Layer-2 project, is shutting down after a major exploit in July drained its reserves and left the team unable to secure new funding. The project's K token has fallen by over 80% following the announcement. The team plans to reimburse Phoenix lenders and hack victims, with withdrawals open until Sept. 30 and an Ethereum claim contract and ERA airdrop planned for October.

Ethereum Layer-2 project Kinto has announced its shutdown after a significant exploit in July drained its reserves and left the team unable to secure new funding. The project's K token has fallen by over 80% following the announcement. Kinto plans to reimburse Phoenix lenders and hack victims, with withdrawals open until September 30 and an Ethereum claim contract and ERA airdrop planned for October.

The incident, which occurred on July 10, stemmed from a vulnerability in the ERC-1967 Proxy standard, a widely used OpenZeppelin codebase for upgradeable smart contracts. Attackers minted 110,000 fake Kinto tokens on Arbitrum (ARB) and used them to siphon funds from Uniswap (UNI) liquidity pools and Morpho (MORPHO) lending vaults, draining a total of 577 ETH (worth $1.9 million) [1].

Kinto attempted to stabilize operations by raising $1 million in debt through its Phoenix Program. However, mounting debt, weak market conditions, and the loss of investor confidence proved insurmountable. Fundraising efforts have stalled, and team members have not been paid since July [2].

The project has consolidated around $800,000 of remaining assets into a foundation-controlled safe. Phoenix lenders are expected to recover about 76% of their principal, while hack victims on Morpho will receive up to $1,100 each from a $55,000 goodwill grant funded personally by Kinto founder Ramon Recuero [1].

Kinto has urged users to withdraw their assets before September 30. After that, a claim contract will be deployed on the Ethereum mainnet in October to allow users to recover balances. A scheduled ERA airdrop will still be distributed on October 15 [2].

The shutdown is a stark reminder of the risks that Layer-2 and DeFi projects face. The exploit has fueled renewed calls for stricter security measures, better treasury protections, and sustainable yield models [1].

References:
[1] https://crypto.news/kinto-price-slides-shutdown-1-9m-hack-july-2025/
[2] https://beincrypto.com/kintos-k-collapsed-before-unlocking/