Frozen OKEx Crypto Traders Can Cash Out, But Would Pay a Price

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Institutional users of cryptocurrency exchange giant OKEx can now get their holdings out, though it will cost them to do so.

The exchange, which made withdrawals unavailable last week after Chinese police launched a probe linked to the firm, began letting users within OKEx trade with each other on Wednesday.

Hours later, blockchain developer Zulu Republic -- along with liquidity provider Alameda Research and crypto trading community Whalepool -- created a way for institutional investors to sell their OKEx deposits for a token representing Bitcoin or Tether on the Ethereum blockchain. A user gets one token for every OKEx Bitcoin deposited into the venture’s OKEx account. The token currently trades for about 93 cents on the dollar on the Uniswap exchange.

“My guess is if they were expecting withdrawals to resume tomorrow, they’d tell us,” said Sam Bankman-Fried, Alameda’s chief executive officer, adding that he believes no funds have been moved or stolen. “There’s not been a lot of guidance on what to expect. I think sentiment is weeks to months when withdrawals will open up.”

Within the first hour of the token’s availability, five institutional investors reached out to the venture, which charges a 1% fee on the swap plus a fee for a regulatory check, Zulu CEO Daniele Sestagalli said in an interview. Users wishing to swap back to their OKEx accounts -- if the exchange unfreezes withdrawals, for instance -- have to pay a 1% fee as well. The minimum order amount is 100 Bitcoin, he said. Bitcoin is currently trading around $13,000.

Traders need to visit Isaidno.ooo to join the waiting list for withdrawal approval.

OKEx halted withdrawals last week after Chinese police launched an investigation linked to it.

OKG Technology Holdings Ltd. -- whose controlling shareholder, Xu Mingxing, is also the founder of OKEx -- said in a Hong Kong stock exchange filing Oct. 18 it has been informed Xu is under investigation by public security authorities in China. OKG said it hasn’t reached Xu to confirm he is being investigated and the group wasn’t subject to any government probe in China to the best of the board’s knowledge.

In an earlier statement, OKEx said an unidentified staffer responsible for users’ private keys -- accounts where coins are stored -- has been “out of touch” while cooperating with a police investigation, the Malta-based exchange said in an Oct. 16 release. The exchange emphasized that everyone’s deposits are safe.

OKEx didn’t immediately respond to a request for comment.

In a tweet, Bankman-Fried cautioned about the venture: “Use at your own risk.”

©2020 Bloomberg L.P.

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