Zhang Jian, founder of the Chinese crypto exchange Fcoin, revealed earlier today in a message that FCoin may not be able to pay the 7,000-13,000 BTC (that is $ 67 million to $ 125 million) that it owes users.
According to Zhang, the exchange has not been hacked and no exit scam. But there are indications that it is exactly that.
Zhang claims that the shutdown is the result of a series of internal data errors and decisions that are too complicated to explain:
“This is a problem that is a little too complicated to explain in one sentence, the time span is also long and the two story development lines progress and influence each other at the same time, leading to the final result.”
After the launch of FCoin in May, the reported trading volumes of the stock exchange overnight became some of the largest in the world with a new business model called ‘transaction mining’. A Redditor later reported that this volume was actually fake. The FCoin order book seems to be crawling with bots. “The price of FT is constantly being manipulated,” wrote a Redditor, who also described the exchange as a scam.
The business model was suspicious from the start. There was no airdrop nor ICO at the launch. FCoin distributed 51% of its own tokens to users for the reimbursement of transaction costs. Users were encouraged to perform transactions as often as possible because the platform reimbursed 100% of the transaction costs they paid in FT tokens. 80% of the daily income of the exchange from transaction costs were then reimbursed to users.
Binpen’s CEO Changpeng Zhao has been calling FCoina Ponzi since mid-2018. He also commented on Zhang’s post in a tweet:
“I rarely called 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 himself? Except scammers. “
Zhang said that errors had been detected in the FCoin system since 2018, but did not explain why FCoin had not solved such problems before it was too late:
“With the deepening of the research we have found a large number of existing data problems of dividends and mining revenues, and these problems have been around for many days. As a result, a large number of users have already gone through operations, such as buying and selling different currencies and withdrawing cash, contaminating the assets. “
The platform was suspended a few days ago by its own risk management account. This caused a lot of speculation that the project stopped and that the operators used it as an excuse.
In the last few sentences on his blog post, Zhang claimed that he would personally handle users’ email requests for recordings. He also said that he would compensate FCoin user losses with the profit he would make from his other projects. But again, he did not mention which specific project he worked on or when he could repay the money he owes to the users.
Some Chinese sites have reported that after Zhangjian has admitted that he owes users $ 125 million in debts, he may face civil lawsuits in the near future. But since the exchange has been registered abroad and Zhang has also moved from China, it can be difficult for the FCoin case to find a domestic legal solution.