Ethereum Layer 2 Kinto Shuts Down After $1.55M Exploit

13 hours ago

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What led to the collapse of Ethereum Layer 2 project Kinto?

Will victims of Kinto's hack get their funds back?

How did Kinto's team respond to the hack and its aftermath?

Ethereum Layer 2 Kinto Shuts Down After $1.55M Exploit — Image source: Unblock Media

Ethereum Layer 2 Kinto to close on September 30 after July exploit.
Failed recovery efforts force Kinto founder to pledge partial reimbursement.

On September 7, 2025, The Block reported that Ethereum Layer 2 network Kinto will shut down operations by September 30, following a devastating $1.55 million exploit in July and failed efforts to recover the platform's liquidity and solvency.

On July 10, an attacker exploited a smart contract vulnerability on the Kinto platform by creating and dumping 110,000 fraudulent Kinto tokens on the Arbitrum network, leading to a drain of 577 ETH from the platform's lending vault and liquidity pool. This caused a 95% collapse in the value of Kinto's native token. The vulnerability had been disclosed by security researchers shortly before the attack, but Kinto was breached within hours of the disclosure, leaving no time to implement safeguards.

In response, Kinto initiated the "Phoenix" recovery project, which aimed to mitigate losses through a new token offering and by raising $1 million to replenish some of the stolen funds. However, the additional financial pressures from this effort compounded the platform's challenges, leaving it unable to secure further financing and forcing the decision to cease operations.

Founder Ramón Recuero announced the closure, revealing that the team had been working without pay since the exploit. Remaining platform assets will primarily be used to repay lenders involved in the Phoenix recovery project, who are expected to recover 76% of their investments. Additionally, Recuero has pledged $55,000 in personal funds to help reimburse other affected users, offering up to $1,100 for each impacted address.

This is the second time a protocol founded by Recuero has suffered a major exploit. His Babylon Finance project incurred a $3.4 million loss in the 2022 Rari Protocol hack. Recuero emphasized the importance of an orderly closure, stating, “We have one responsible choice left: shut down cleanly and protect users/lenders as best as possible.”

As of September 7, 2025, 22:08 UTC, Ethereum (ETH) is trading at $4,292.53, with a 0.22% change in 24-hour trading volume. Uniswap (UNI) is priced at $9.35, reflecting a 0.30% change, while Morpho (MORPHO) stands at $1.96 after a 1.13% rise, according to market data.