Could There Be Much More to FCoin's Closure?
Yesterday the cryptocurrency exchange FCoin shocked users and announced that they are insolvent and will close operations. The announcement titled "FCoin Truth" was posted on both their official Subreddit and Twitter.
In the announcement it was revealed that FCoin was not the victim of a hack, but instead made some questionable decisions. The official cause for the exchange's closure was a problem with FCoin's native exchange token FToken. The exchange token payed out very high dividends based on the exchange's reported profits and became very popular. It later crashed and caused major financial problems for FCoin as per the announcement.
The total supply of FToken held by the FCoin team was burned roughly a week ago on the 10th of February. Despite a minor price recovery with FToken, the exchange still shut its doors to traders. Seeing that FToken was exclusively traded on FCoin, token holders were left with a token that isn't widely traded.
The exchange announced that it is unable to pay back anywhere between 7000-13000 BTC which could potentially reach $126 million. The CEO of FCoin revealed in the announcement that he is resigning to create a new project and will compensate users in the future.
"I have decided to switch tracks and start again, hoping to get up again as soon as possible, and use my personal new project profits to compensate everyone for their losses. I will disclose any important progress of the new project through public channels."
FCoin's Cold Wallet Transfers
Earlier today, the founder of Primitive Ventures and Bitcoin influencer Dovey Wan revealed some interesting information on FCoin. In her tweet, she posted a flow from FCoin's cold wallet to other exchanges.
WTF tracking on FCoin's Bitcoin cold wallet shows the majority of its asset has been transferred to other exchanges ...address: 12rU7whLERNrkDb8bTe9VJJSKZvCXy7dj7— Dovey 以德服人 Wan 🪐🦖 (@DoveyWan) February 18, 2020
They said they can‘t withdraw for its users???
What a SHAMELESS scammer
(visualization done by @ChainDotInfo) https://t.co/xfVAk8OzBH pic.twitter.com/0LWNVVTcMx
An examination of the wallets funds does indicate that funds were transferred a few times before reaching other exchanges. The total amount sent is 9889 BTC which is valued at $96 million at today's evaluation. An interesting detail is that most funds were transferred from their cold wallet to a different wallet in October 2019. The second wallet then apparently distributed funds to various exchanges as recent as the 13th of February 2020.
This could indicate a measure of planning involved in regard to the exchange's closure.
KuCoin & Sepoch Exchanges Offer Support
Following the collapse of the FCoin, other exchanges offered to assist FCoin's traders in different ways. The two exchanges that have offered some form of help has been Sepoch.com and KuCoin.
Sepoch has announced that they will exchange the value of FToken with USDT. This is limited to 1 million USDT and will operate on a first-come-first served basis.
Oddly enough, FToken still has value according to CoinMarketCap and is listed as worth $0.0422 per token. These are highest rates FToken has seen since November.
KuCoin took a different path than Sepoch. They instead have announced a market maker support program. This program has 2 separate parts. First users who were considered qualified market makers on FCoin will be considered market makers on KuCoin for 3 months. This will give major users from FCoin various benefits. The second part of KuCoin's support plan is a $50 million dollar zero interest loan in cryptocurrencies to market makers. As per their announcement "The loan includes but is not limited to BTC, USDT and ETH and the interest-free amount depends on the actual loss."
Hopefully more exchanges will offer support to those impacted by the closure of FCoin.
Written by Jonathan Ganor
Writer & cryptocurrency aficionado