FCoin Cryptocurrency Exchange Shuts Doors Owing Users $125 Million
FCoin, the Chinese crypto exchange, may not have the ability to pay the 7,000-13,000 BTC that it owes users. This information was revealed by the founder of the crypto exchange, Zhang Jian, in a post. The amount owed translated to between $67 million and $125 million.
Zhang went on to explain that the exchange has not been hacked, and it is not an exit scam. However, when evidence is analyzed keenly, it appears to be what Zhang is denying. He insists that this shutdown is a result of a series of severe internal data errors and decisions that are quite complicated to explain:
“This is a problem that is a little too complicated to be explained in a single sentence, the period is also large, and the two-story development lines are advancing and affecting each other at the same time, leading to the outcome.”
These developments have most of the users worried since they are not promised a refund yet.
The Start of a Nightmare
After FCoin launched in May 2019, the exchange reported trading volumes that became a major talking point throughout the world overnight. The trading volumes exploded as a result of a business model that the firm referred to as “transaction mining.” Later, it was revealed by one Redditor that this volume was not real.
One user wrote that the price of FT was always being manipulated and also described the FCoin exchange as a scam. The business model that this exchange used appeared suspicious from the start since there was no airdrop or an initial coin offering (ICO) at launch.
FCoin distributed about 51% of its native tokens to users as reimbursement of transaction fees. Moreover, the users were incentivized to transact as frequently as they could because the platform refunded 100% of the transaction fees they paid in FT tokens. Approximately 80% of the exchange’s daily revenue from the transaction fees was then paid back to the users.
Since the middle of 2018, Changpeng Zhao, Binance’s CEO, has referred to the exchange as the FCoina Ponzi scheme. He also commented on Zhang’s update in a tweet:
“I rarely called out anyone, with exceptions. On Chinese social media, I called FCoin a pyramid scheme in mid-2018. Their founder calls his own plan a “better invention than #Bitcoin”. That did it for me. Who would say such a thing? About themselves except scammers”
There had been several errors detected in the FCoin system since 2018 according to Zhang. However, he did not say why the crypto exchange had not addressed and solved these problems until it is too late:
‘With the deepening of the investigation, we found a large number of existing data problems of dividends and mining returns, and these problems have existed for many days. As a result, a large number of users have already been through operations such as buying and selling various currencies and withdrawing cash, causing the pollution of assets.”
This platform was suspended several days ago by its account for risk-control. This suspension resulted in a great deal of speculation from the entire crypto world. Many said that the project was shutting down, and its operators were using it as an excuse to vanish without refunding investors.
The Final Strain
Zhang purported that he would handle all the users’ email requests for withdrawals in person as he concluded his blog post update. Additionally, he said that he was ready to compensate FCoin user losses with the profits that he would make from his other projects.
Despite all that, he never mentioned what specific project he was working on or even when he would have enough funds to pay back the money he owes to the users. Several Chinese sites and news outlets have reported that with Zhang Jian’s admitting that he owes users $125million debts, he might face civil lawsuits soon.
However, the FCoin Exchange is registered overseas, and Zhang has also relocated away from China. Thus, it may prove to be a daunting task for the FCoin case to see any form of domestic legal solution. It will also become difficult for them to access Zhang if he decides not to honour his promise of making refunds.