Top cryptocurrency exchange OKEx is in the news this week, with the exchange suspending withdrawals on its platform amid possible money laundering concerns. While the company is trying to placate its customers that their funds are safe, however, a top official has apparently been roped into an investigation.
Possible Money Laundering Links
Earlier this week, local news source Caixin reported that Mingxing “Star” Xu, one of OKEx’s founders, was recently questioned by police officers. As the news source reported, Xu was questioned about a week ago and has missed work steadily since then.
While disturbing, the report also had some vagueness to it. For one, Caixin failed to say where the investigation took place, as OKEx is headquartered in Malta but also has an office in Hong Kong. The news source also didn’t tell if he was still in police custody.
The development is coming after OKEx froze customers’ withdrawals on its platform. The exchange claimed in a statement that it was having issues with one of its private key holders and had been unable to reach him.
“One of our private key holders is currently cooperating with a public security bureau in investigations where required,” the company said in its statement, adding, “We have been out of touch with the concerned private key holder. As such, the associated authorization could not be completed,” the exchange pointed out.
The exchange had been making some big-money transfers in the hours before it initiated the freeze. According to updates from on-chain tracker Whale Alert, it conducted outgoing transfers of 1,180 BTC (about $13.6 million), 50 million TRX (worth about $1.3 million), and 21,000 ETH (worth about $7 million) to unknown wallets. The exchange also got a transaction worth about $14 million in USDT tokens about six hours before the announcement came out.
It’s unclear what prompted the entire thing. However, Colin Wu, a reporter for WeChat public account Wu blockchain, posited on Twitter that the whole thing could be a case of money laundering.
Earlier, Wu had exclusively disclosed that the OTC merchant on OKEx had mistakenly received 500,000 CNY from the fraud group and was hunted by the police across the provinces.
— Colin Wu（WuBlockchain） (@WuBlockchain) October 16, 2020
“The Chinese government is cracking down on money laundering using cryptocurrency for telecom fraud, and centralized exchanges are in a very dangerous state,” Wu claimed.
Something Smells Fishy
Although Caixin claimed that Xu is the key holder in question, news source Mars Finance claimed otherwise in a competing report. As the news source guessed, Wu could be in custody concerning a backdoor listing for the OK Group in Hong Kong last year. OKEx has also severed ties with Xu. The exchange explained that the founder hadn’t worked with the exchange in a while.
Even more complicated is the fact that OKEx appears to still be moving funds despite the withdrawal freeze. Earlier today, Whale Alert confirmed that the exchange had made two transactions – worth 998 BTC ($11.3 million) and 997 BTC ($11.3 million) in the early hours of the day.
While some have suggested that they could merely be delayed transactions, others believe that there is some manipulation afoot.