Caixin
Oct 17, 2020 03:39 AM
BUSINESS & TECH

Exclusive: OKEx Suspends Cryptocurrency Withdrawals After Founder’s Arrest

OKEx ranks 11th among cryptocurrency exchanges by trading volume according to CoinMarketCap.
OKEx ranks 11th among cryptocurrency exchanges by trading volume according to CoinMarketCap.

The bitcoin exchange OKEx suspended cryptocurrency withdrawals on the platform Friday after its Chinese founder was taken away by police.

OKEx founder Xu Mingxing was taken at least a week ago and hasn’t appeared in a work-related social media group recently, according to a person close to the company. It’s not clear what the investigation is about. There have been signs of renewed crackdown of anti-money-laundering activities on over-the-counter (OTC) trading platforms of cryptocurrencies.

The suspension of withdrawals was because one of the exchange’s private key holders is cooperating with the public security bureau in an ongoing investigation, OKEx said Friday in a statement. Two persons close to OKEx told Caixin that the key holder is Xu, a tycoon who has a hands-on management style for the company’s finances, one of two persons said.

A private key is a sophisticated form of cryptography that allows a user to access his or her cryptocurrency. When dealing with cryptocurrency, a user is usually given both a public key and a private key to send and receive coins, but he or she won’t be able to withdraw them without the unique private key.

The exchange said it has been “out of touch” with the key holder, preventing authorization of transactions. The security of customer assets “will not be affected” by the event, the exchange said.

OKEx CEO Jay Hao said on Sina Weibo that the decision to temporarily suspend withdrawals was due to personal issues of the private key holder.

This is not the first time Xu has been in trouble. In September 2018, he was detained by the police amid a dispute with investors who had huge losses on his bitcoin exchange platform OKCoin.

Many investors complained that on Sept. 5, 2018, when bitcoin and other cryptocurrencies plunged by nearly 10%, OKCoin’s platform crashed, causing significant losses for many investors who traded cryptocurrency futures on the platform.

An OKEx seller told Caixin that “scrutiny has been tightened recently.” For OTC transactions, buyers are required to provide screenshots to regulators of their payment accounts within a week to assist identification and account verification, the seller said.

OKCoin, together with other China-based bitcoin trading platforms, closed their Chinese mainland trading operations and moved offshore after Chinese regulators issued an edict in August 2017 forbidding fundraising through initial coin offerings.

Xu then founded OKEx and registered it in Malaysia. According to OKEx’s website, the exchange’s operators are based in Malta and Seychelles.

OKCoin and OKEx still keep offices in Beijing and Shanghai and allow domestic investors to trade cryptocurrencies through OTC trading. Users can buy popular cryptocurrencies such as Bitcoin, Ethereum and USDT from OKEx-verified merchants in a way similar to e-commerce platforms such as Amazon, the exchange said on its website.

OKEx ranks 11th among cryptocurrency exchanges by trading volume according to CoinMarketCap.

Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (bobsimison@caixin.com).

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