Friday, 16 October 2020



Crypto exchange OKEx halts withdrawals in China probe

OKEx offers spot and futures trading in digital currencies, such as bitcoin and Ethereum © AFP via Getty Images

One of the world’s biggest cryptocurrency exchanges has halted withdrawals after revealing it has lost contact with an employee who is “co-operating” in a Chinese government investigation.

OKEx, an exchange that does business globally, said on Friday that it was “out of touch” with the employee, who was co-operating in the inquiry launched by a “public security bureau” in China.

The official is a holder of the exchange’s so-called private keys, which enable the authentication of cryptocurrency transactions. These digital keys — a long string of letters and numbers — cannot be recreated. OKEx did not disclose how many keys were unavailable or for which cryptocurrencies.

The incident highlights that aside from the risk of sudden drops in price for cryptocurrencies, buyers frequently face an array of barriers to accessing their funds, often hinging on the actions of a small number of exchange executives.

An OKEx spokeswoman confirmed that the probe was opened by Chinese authorities but said she was “unable to comment on any matters that are under investigation”. She also declined to provide specific details on the affected private keys, citing the safety of user funds.

A statement on OKEx’s website said the decision to halt withdrawals was made “in the best interests of customers and [to] deliver exceptional longtime customer service”.

“We assure that OKEx’s other functions remain normal and stable and the security of your assets at OKEx will not [be] affected,” it added.

OKEx offers spot and futures trading in digital currencies, such as bitcoin and Ethereum, and says on its website that it serves millions of customers in 100 countries. It says its bitcoin futures trading venue handles $1.5bn in transactions per day.

“I hope my withdrawal will be fixed soon,” one user said in an official OKEx support forum. “In this market, such incidents will make investors very worried.”

OKEx moved its headquarters to the island nation of Malta two years ago from Hong Kong. It employs a significant number of workers in China, the US and Hong Kong, according to a review of its LinkedIn page.

The industry has become more professional in recent years but disparate regulations in various jurisdictions mean the quality of safeguards varies widely between exchanges. It has suffered from several high-profile incidents of fraud in which large sums of customers’ money has been stolen.

One user of OKEx’s support forum on Friday noted they were concerned because of memories of last year’s collapse of a Canadian crypto exchange operated by Quadriga. The company said its chief executive, Gerald Cotten, had died in India. An inquiry by the Ontario Securities Commission later found he had committed a long-running fraud in which “Cotten spent, traded and used [customer] assets at will”.

The exchange’s clients lost at least C$169m (US$128m), according to the OSC, which concluded after an extensive review: “What happened at Quadriga was an old-fashioned fraud wrapped in modern technology.”

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