Kinto to Shut Down After $1.9M Hack, Token Price Crashes 85%
On Sept. 7, Kinto announced via X that it will cease operations on Sept. 30, following a July exploit that drained about 577 ETH (worth $1.9 million) and left the project unable to recover financially.
The news triggered sharp volatility, with Kinto’s native K token plunging 85% in the past 24 hours and now trading 94% lower over the last month.
From Exploit to Shutdown
The hack originated from a vulnerability in the ERC-1967 Proxy standard, a popular OpenZeppelin framework for upgradeable smart contracts. Attackers minted 110,000 fake Kinto tokens on Arbitrum, then funneled them through Uniswap liquidity pools and Morpho lending vaults to drain funds.
Kinto attempted to recover through its “Phoenix Program,” raising $1 million in debt to stabilize operations and resume trading. But growing liabilities, poor market conditions, and eroding investor trust ultimately proved fatal. Fundraising attempts stalled, and the team has gone unpaid since July.
Reimbursements and Next Steps
Kinto said it has consolidated roughly $800,000 of remaining assets into a foundation-controlled safe. These funds will be used first to repay Phoenix lenders, who are expected to recover about 76% of their principal.
Hack victims on Morpho will receive up to $1,100 each from a $55,000 goodwill fund personally contributed by Kinto founder Ramon Recuero. Any additional recoveries from the stolen ETH will be distributed to victims first, with the remainder allocated through a community Snapshot vote.
Users have until Sept. 30 to withdraw assets from Kinto’s Layer-2. After that date, a claim contract will be deployed on Ethereum in October to facilitate withdrawals. A previously planned ERA airdrop will still take place on Oct. 15.
A Warning for DeFi
Kinto’s collapse underscores the risks facing Layer-2 and DeFi platforms, particularly those built on upgradeable smart contracts. The incident has renewed calls for stronger security practices, better treasury safeguards, and more sustainable economic models.
“We’ll shut down responsibly, return what we can today, and keep fighting for recoveries tomorrow,” the Kinto team wrote on X.
