Kinto to Shut Down After $1.6 million Exploit Derails Recovery

- Kinto, an Ethereum Layer 2 network, to cease operations on September 30, 2025. - Closure follows a $1.6 million exploit in July 2025 that disrupted recovery efforts. Ethereum Layer 2 network Kinto will cease operations on September 30, 2025. This decision follows a July exploit that drained $1.6 million from the platform and caused severe financial instability, The Block reported on September 7, 2025. The attack occurred on July 10, 2025, when a sophisticated attacker exploited a smart contract vulnerability. The attacker minted 110,000 fraudulent Kinto tokens and drained 577 ETH—worth $1.6 million at the time—from the platform’s Morpho lending vault and a Uniswap v4 liquidity pool. Following the exploit, Kinto’s token price plummeted by approximately 95%, leaving the network in severe financial distress. Security researchers had flagged the vulnerability before the attack and informed multiple DeFi platforms, but Kinto was unable to implement a fix in time. To recover from the financial damage, Kinto launched the "Phoenix" campaign. The campaign raised $1 million to replenish lost liquidity and restart operations; however, these efforts fell short. Mounting debt from the recovery phase hindered the network’s ability to secure additional financing for long-term sustainability. Kinto's founder, Ramón Recuero, announced the shutdown, calling it the most responsible outcome to protect users and lenders. Recuero outlined a plan for an orderly closure, which includes partially reimbursing hack victims with the foundation's remaining assets and $55,000 of his personal funds. Phoenix lenders will recover 76% of their principal loan amounts, while those impacted by bad debt on Morpho will receive up to $1,100 per address. Recuero also disclosed that the core team has worked without salaries since July, highlighting the depth of the financial strain. According to CoinMarketCap, Ethereum (ETH) is trading at $4,299.659 as of September 8, 2025, at 05:14 UTC, showing steady performance with a 0.006% change in 24-hour trading volume. Meanwhile, Arbitrum (ARB), another Ethereum Layer 2 solution, is priced at $0.496, with a 0.07% decrease in its 24-hour trading volume. The Graph (GRT) showed a slight recovery, trading at $0.09 as of 05:13 UTC and recording a 1.024% increase in 24-hour trading volume. While Ethereum’s market remains stable, the exploit raises broader concerns about DeFi security and investor confidence in Layer 2 networks.