The closing down of a crypto exchange can take place for many reasons. Some of the most common reasons are due to hacks or government regulations. This can be seen in exchanges such as Mt Gox which was supposed to close down after a hack a few years ago and also with Brazilian crypto exchanges which were forced to close down recently due to stringent government regulations. There is also the matter of exit scams in which exchanges close down in order to hold onto the funds of their users. Because they hare the medium through which most people acquire cryptocurrency, the state of crypto exchanges often reflects the state of the industry in general.
According to Zhang Jian, founder of Chinese crypto exchange Fcoin, users of the exchange will not likely be able to recover the 7000 to 13,000 bitcoins that are been owed to them and these are valued that’s between $67 million to one $125 million.
Initial responses to this announcement include a possible hack taking place at the exchange or this being an exit scam but Jian has stated that it is neither of these. According to his blog post, the closure of the exchange is due to such internal details and decisions that are too complicated to explain.
“This is a problem that is a little too complicated to be explained in a single sentence, the time span is also large, and the two story development lines are advancing and affecting each other at the same time, leading to the final outcome,” the post said.
The exchange has been under suspicion since its launch back in May as it reported record levels of transactions, many of which have been labeled as fake by users and those within the industry. The exchange worked with a system called transaction mining but many were not convinced. The exchange did not use an airdrop model on ICO but instead refunded users their transaction fees in form of FT coins and they were encouraged to carry out as many transactions as possible with 80 percent of the transaction costs been reimbursed daily.
A few days ago, the exchange was shut down by its own accounts for risk control and this, for many users, signaled an exit scam of some sort. Jian ended his blog post by stating that he will read through the emails requesting compensation personally and that he will try to reimburse users with profits from future projects which he has not specified.