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Chinese Police Investigation Halts Withdrawals at Cryptoexchange OKEx

Bloomberg logo Bloomberg 10/16/2020 Zheping Huang

(Bloomberg) -- Chinese police have launched an investigation linked to cryptocurrency exchange giant OKEx, forcing one of the world’s largest Bitcoin trading platforms to block users globally from withdrawing money.

An unidentified staffer responsible for users’ private keys -- accounts where crypto assets are stored -- has been “out of touch” while cooperating with a police investigation, the Malta-based exchange said in a statement Friday. As a result, the company has halted all cryptocurrency withdrawals, without saying when they will resume. OKEx founder Star Xu was the staffer taken away, Caixin reported, citing two unidentified sources at the firm.

Bitcoin fell as much as 2.9% to $11,216 on Friday. OKEx’s native token, which serves as a user loyalty program to incentivize trades, plunged 14%, according to data tracker CoinMarketCap.

“We are not at liberty to discuss any matters that are under investigation but can reveal that it is not related in any way to anti-money-laundering or to OKEx,” the company said in an emailed statement. It “would like to assure all OKEx users that their funds are safe and that all other functions on OKEx are unaffected.”

OKEx, one of the most active cryptocurrency spot and derivatives trading platforms, alongside the likes of Binance and Huobi, didn’t elaborate on what prompted the police investigation or comment on Xu. Beijing has in past years cracked down repeatedly on crypto-trading, fearing its highly speculative nature might turn destabilizing or erode its grip on monetary policy. Some of the industry’s most spectacular failures have begun with suspensions of withdrawals, from the recent disappearance of $400 million worth of tokens at Japan’s Coincheck Inc. to Mt. Gox’s 2014 implosion.

Read more: China’s Crackdown on Cryptocurrencies Claims First Victims

Spot price falls almost 3% after news on probe linked to Okex © Bloomberg Spot price falls almost 3% after news on probe linked to Okex

Xu launched OKEx’s predecessor OKCoin in 2013 but later moved away from the exchange business, instead focusing on his blockchain venture OK Group. Originally from China, the startup moved its base to Malta after Beijing started to crack down on crypto trading.

OKEx saw $3.4 billion of crypto spot trading on its platform over the past 24 hours, ranking fourth among the world’s largest digital asset exchanges, according to CoinMarketCap. Though volume data in crypto are often seen as suspect, OKEx is generally regarded as one of the world’s top crypto exchanges.

“We understand that the suspension of withdrawals directly impacts our users’ experience on OKEx, and we wholeheartedly apologize for this,” OKEx CEO Jay Hao said in the statement. “All other activities — including deposits, spot trading, derivatives, staking, etc. — remain unaffected.”

(Updates with company’s statement from the second paragraph)

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