OKEx users found out that they couldn’t cash their chips early Friday as the founder of the cryptocurrency exchange was ‘arrested’.
Mingxing Xu, also known as Star Xu, was reportedly being questioned by police, Chinese news agency Caixin reported today. The news from Caixin came shortly after OKEx issued an “Announcement on Suspension of Withdrawals ” of crypto assets on its platform, meaning no one could get their money out. The company’s digital coin, OKB, fell nearly 11%.
Some of the company’s key personnel are said to be cooperating with an investigation into Star Xu and that shuttered accounts as of 11:00 am in Hong Kong. The company said that “other functions of OKEx are guaranteed to be normal” and “asset security is not affected.”
Hong Kong-based crypto sources said that Xu may be being held to help an investigation into the backdoor listing of OK Group in Hong Kong in 2019 and is not related to the exchange’s withdrawal issue.
Caixin also reported that Xu had been arrested at least a week ago and had not appeared at the company for many days. Mysteries abound. He was also part of a fraud investigation in 2018.
Looking at this from a the big picture: what does this mean for the industry in China?
The OKEx case is a clear reminder for the blockchain industry in China that it needs to be totally decentralized. It proves that only when there are no key owners of an organization (such as a crypto exchange) can it be immune from political influence and interference. Some industry insiders see decentralization solutions benefiting from problems such as this, as it is a reminder that so-called DeFi projects could be scaled to industries, other than finance, in order to protect against crises exemplified by today’s OKEx withdrawal ban.
Some big crypto traders are moving on the actions out of OKEx. Some $56,557,316 was transferred from OKEx to Binance today. According to data by Glassnode, a total of 10,000 BTC (around $113 million) was withdrawn in two large batches in the past 48 hours.
“Chinese traders are still able to use other trading platforms, including decentralized exchanges, so temporary difficulties with one exchange will not have a significant impact on those traders,” says Alexandr Denisov, CEO and co-founder of Deep Quant, a Russian software company specializing in algorithmic trading of cryptocurrencies. They are currently looking to partner with OKEx.
For the most part, people don’t see this as a death knell to OKEx yet, or a shot across the bow of China and Hong Kong’s crypto market.
“We don’t know yet if they did anything unlawful at OKEx,” says Kirill Bezverhi, CEO of Moscow based FinPR Agency, which works with blockchain and new tech companies in Russia. “I’m not sure that this is a sign that China has something against blockchain. In the short term, we can really see the outflow of deposits from the Chinese crypto exchanges today, simply because people are trying to reinsure themselves and protect their assets.”
OKEx is one of China’s three biggest exchanges, with more than $6 billion in daily trading volume. Some 1.1% of the circulating Bitcoin supply is held in OKEx cryptocurrency wallets.