Zhang Jian the FCoin CEO, spilled the beans, saying that Deposits would be suspended due to 7,000-13,000 Bitcoins were lost.
The first Chinese-language message, followed by Redditen’s English-translated one, mainly concerned Chinese businessmen. Previously, FCoin exchange was one of the largest daily trading exchanges, but there were data shortages in the system, and the distribution model under consideration was unstable.
In his speech, Zhang said that the exchange was neither hacked nor closed, but the problem was “too complex to explain in two words.” The problem was caused by an internal system failure, which was rewarding users with higher than needed fees for mining for a long time. Since it didn’t hit the company on time, the situation imploded after the beginning of 2019.
FCoin – the Chinese cryptocurrency exchange, has suspended trading last week due to the alleged conflict of the founder with the team, has revealed new information about the reasons for what is happening.
As the CEO of the FCoin mentioned, the exchange cannot satisfy customers’ requests for funds’ replenishment, because of the deficit of 7,000 to 13,000 BTC ($67 – 124 M) occurred. Initially, his message was published in the support section of the FCoin website in Chinese and then translated into English by a trusted representative on Reddit.
FCoin Exchange was founded by former Huobi Technical Director Zhang Jian in May 2018 and it was one of the biggest by the trading volume giant on the local market, thanks to its controversial mining model using transactions. In June 2018, FCoin reached first place among all cryptocurrency exchanges in the world with a trading volume of $5.6 billion.
Jian mentioned that the exchange was not hacked, and the issue was “too complicated to explain in one sentence.” It is a critical error in the internal system, which credited users who took part in the mining program through transactions with more funds than expected for a long time. This continued from mid-2018, but until mid-2019, the exchange did not audit its systems thoroughly and could not notice an error.
As FT decreased in 2019, the FCoin team began buying the tokens back in the secondary exchange to hold up the price and restore community trust, which, according to Jian, was another managerial error and only exacerbated the exploitation of the system’s vulnerability by users.
Jian promised to handle the processing of requests for Withdrawing customer funds by email personally and expects the whole operation to take 2-3 months. In addition, he intends to create the new projects, the profits from which, besides his own assets, will be used to pay compensation.
“I shall be held responsible for this until the day I die,” he added.
Jian also said that he appealed the Huobi founder Leon Li for assistance, but did not receive support. “I was desperate and needed some urgent help. Then we examined the possible rescue scenarios. The result was exactly as I expected. I knew that if Li Lin would agree to save us, Huobi would have been sunk into oblivion. If I were in his shoes, I would have to make the same solution,” said Jian.
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