Preliminary Assessment Report on ZKJ Token Flash Crash

Following the flash crash of the ZKJ token on June 15, 2025, which lost over 85% of its value in just one day, Polyhedra Network has published a preliminary assessment report on the incident.

Causes of the Collapse

The report outlines that the collapse was triggered by several factors:
– Coordinated on-chain liquidity attacks.
– Large transfers of tokens to centralized exchanges (CEX) by Wintermute.
– The liquidation of leveraged positions during the crash.

Planned moves towards liquidity pools on PancakeSwap played a significant role in the decline of the ZKJ/KOGE trading pair. Notably, six different addresses withdrew millions of dollars in liquidity and executed aggressive ZKJ sales:
–0x1A29…599: Sold 1.57 million ZKJ, withdrawing approximately $4.3 million worth of LP tokens.
–0x0781…dE7: Converted KOGE to ZKJ and sold 1 million ZKJ for $3.45 million.
–0x6aD3…EBb: Purchased 772,000 ZKJ and sold it within 8 minutes.

In just one minute, other addresses sold a total of 1.8 million ZKJ, applying intense selling pressure to the more liquid ZKJ/USDT pair instead of the less liquid KOGE/USDT.
The concentrated liquidity structure in PancakeSwap V3 further exacerbated losses when the price fell outside the range, accelerating the price drop.

Market Context

Before the crash, the ZKJ/KOGE pair was part of the popular Binance Alpha farming campaigns. However, a change in Binance’s points system in early June reduced rewards, weakening liquidity support.

To counteract the decline, the Polyhedra Network team provided about $30 million in stablecoins, including USDT, USDC, and BNB, to DEX market makers on PancakeSwap. Unfortunately, due to downward price pressure, these tokens were converted to ZKJ, failing to relieve selling pressure.

Particularly on exchanges like Bybit, leveraged positions that were initiated in response to dropping spot prices faced liquidation. Between 3 PM and 5 PM, $94 million in long positions were forcibly closed, with at least six significant liquidation events surpassing $1 million each occurring around 3:57 PM UTC.

Wintermute, a leading market maker, made notable transactions during the crash, transferring a total of 3.39 million ZKJ to central exchange addresses from 3:45 PM to 5:14 PM on June 15. During this timeframe, the ZKJ price plummeted from $1.92 to $0.29, and Wintermute’s Ethereum wallet balance fell from 3.41 million ZKJ to 22,688 ZKJ.

Polyhedra Network announced that these events are under preliminary evaluation. A detailed analysis of all on-chain activities is ongoing, and the report will be updated in the upcoming days.

> This is not investment advice.