OKCoin Expands to The US Despite The Detention of The CEO

Source: Wikimedia Commons

The founder of Beijing based crypto exchange OKCoin and second biggest exchange OKEx founder Star Xu was seen under investigation by police about suspected fraud on 11 September 2018. The rumor sparked after photographs and a video of him having talks in Shanghai police station distributed throughout online cryptocurrency sites and Twitter, allegedly related to his involvement in WFEE coin.

One day before the rumor, a local news media Sina Technology posted a photograph of a police report about Xu at 17:59 on September 10. Xu was forced to leave the five-star hotel he stayed in Shanghai and went to the Weifang Xincun police station in Shanghai Pudong branch[1].

Source: Sina Technology

According to WFEE official Twitter, WFEE is a “WiFi sharing ecosystem technology based on decentralized blockchain, the world’s first WiFi blockchain project.” Xu allegedly was a shareholder of the company, which suspected applying fraudulent practices and reported by its investors.

Cointelegraph reported that the incident happened not long after an OKEx new record in trading volume from $2.9 billion in June to $5.7 billion in July. In 24 hours after the news, there was a 3 percent drop in volume[2]. At the time of writing, OKEx volume decreased to $4.5 billion; 21% dropped from the new record.

Figure 1: Top 5 Cryptocurrency Exchanges by Trade Volume

Data Source: CoinMarketCap

A few days after the detention rumor, September 13, an official statement from OK Blockchain Capital (OKBC) was published. The strategic partner of OKEx and subsidiary company of OK Group posted a series of tweets and clarified that OKBC did not participate in the project operation nor be responsible for the project operation results. In addition, Xu was neither a shareholder nor had an equity relationship with WFEE.

Moreover, OKEx Chief of Operations Andy Cheung confirmed the tweets, adding: “Though WFEE has acquired OKBC’s and several other capitals’ investment, the afterward changes of WFEE white paper and team members have not been given notice to OKBC. ”Xu himself responded the allegation in an interview with Honeycomb Finance on September 12 after being released, confirming the 24 hours interrogation, yet denied his participation on the fraud, saying: “In Shanghai, someone reported that I was defrauding. I went to the police station to explain the situation and proved to the police that I did not swindle.[3]

Despite the issue, OKCoin still executed the plan to expand to the United States. Jim Nguyen, the VP Marketing of OKCoin wrote an official statement of Medium, sharing the idea of bringing token-to-token trading platform to 20 new US states; including Alaska, Arizona, Colorado, Idaho, Illinois, Indiana, Kansas, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Montana, Nevada, New Jersey, Tennessee, Texas, Utah and Wisconsin. Claiming itself as the ‘fastest, most secure and most reliable trading platform for a wide variety of digital assets, with costs as low as 0% for makers and 0.05% for takers’, OKCoin worked together with regulators to establish a platform that is completely aligned with both Federal and State laws. One of the features to achieve the goal is by having money transmittal licenses (MTL) for both token-to-token and fiat-to-token trading.

“In order for the cryptocurrency market to reach its full potential, exchanges like OKCoin have to work with existing and new regulators for convertible virtual currency, digital goods, and/or securities,” said Tim Byun, OKCoin CEO. “Our team has worked diligently within the complexities of the US regulatory frameworks. We’re excited to take this major step forward as we aim to break down the barriers preventing a truly global digital asset market while adhering to long-established regulations.[4]

The public didn’t seem to be bothered by the issue as well. According to Sentiment Viz, OKCoin is still a people’s favorite exchange and people are excited about its plan to expand to the US.

Figure 2: Sentiment Towards ‘OKCoin’ Keyword.

Data Source: Sentiment Viz

[1] 贾天真. 2018. 我终于堵到币圈大佬徐明星 还一起进了派出所. [https://tech.sina.com.cn/i/2018-09-11/doc-ihiycyfw8742869.shtml]. Accessed September 16, 2018.

[2] Zuckerman, M. J. 2018. Breaking: Founder of Crypto Exchange OKEx Allegedly Detained on Crypto Fraud Charges in China. [https://cointelegraph.com/news/breaking-founder-of-crypto-exchange-okex-allegedly-detained-on-crypto-fraud-charges-in-china]. Accessed August 16, 2018.

[3] Suberg, W. 2018. OKEx Founder Star Xu Released From Police Questioning, Denies Fraud Charges. [https://cointelegraph.com/news/okex-founder-star-xu-released-from-police-questioning-denies-fraud-charges]. Accessed September 17, 2018.

[4] Nguyen, J. 2018. OKCoin Brings Token-to-Token Trading Platform to 20 New US States. [https://medium.com/okcoin-blog/okcoin-brings-token-to-token-trading-platform-to-20-new-us-states-ea3454d11763]. Accessed September 17, 2018.

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Bitcurate is predictive data analytics for crypto that help better decision making through data-driven insights powered by AI and sentiment analysis.

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