After Exit Scam Rumors, FCoin To Reopen; Plans to Payback Users $130M ‘Lost’ Bitcoin
- FCoin, a China based crypto exchange, has announced that it is making a comeback from its current insolvent state. The exchange found itself in trouble when an alleged $130 million worth of BTC was lost within its ecosystem.
Following its ‘near collapse’, the firm had declared insolvency but promised to reimburse users their funds. FCoin’s community has since established a representative led ‘interim committee’ set to take over FMex and FCoin websites from the firm’s existing team. In addition, the community is in the process of drafting a compensation plan which might be a mix of company equity and the rights of creditors. FCoin is hopeful once they are done with the compensation plan, the exchange will be run by its community.
— Crypto Europe (@CryptoEurope3) February 27, 2020
FCoin’s $130 Million Loss
This crypto exchange has been termed as an ‘exit scam’ by some stakeholders in the industry. Zhang Jian, FCoin’s co-founder, however defended the company’s $130 million loss in a letter dubbed ‘FCoin Truth’ to its exchange users. He attributed a big part of this loss to ‘financial difficulties’ and ‘poor auditing’.
According to FCoin stakeholders, the platform’s reputation of ‘community run’ was compromised when some players acted to manipulate its native token price. Some crypto analysts on the other hand said that FCoin’s ‘tran-fee mining’ meant to compensate its users with native tokens was questionable.
AnChain.AI, a blockchain research firm, on its part noted that FCoin’s attribution to technical difficulties may have been part of the ‘exit plan’ all along. This sentiment is backed by a chain of transactions from FCoin revealing some irregularities in BTC fund transfers and withdrawals.
The FCoin ‘Compensation Plan’ Feasibility
According to an estimation by FCoin, its insolvency value is between 7,000 to 13,000 Bitcoins; this is roughly $61 to $115 million as per today’s prevailing prices. The big question is therefore how the exchange will manage to return all its users funds?
Similar cases in the crypto industry are currently in court while some scammers have already been handed a prison term. Zhang seems to be avoiding this route, pledging his own funds, but only time will tell whether a reputational damage can be reversed in this very new, unfamiliar and volatile market.