- FCoin reportedly owes a staggering 7,000-13,000 BTC ($67 million to $125 million) to its users.
- The founder of the exchange said that a series of internal data errors and a few complicated decisions caused the shutdown.
In a recent blog post, the founder of Chinese crypto exchange FCoin, Zhang Jian, disclosed that not only is the company shutting down, but it will be unable to pay the debt it owes to its users. FCoin owes a staggering 7,000-13,000 BTC ($67 million to $125 million) to its users. Contrary to the evidence present, Jian insisted that the exchange hasn’t been hacked and that it isn’t an exit scam. He said that a series of internal data errors and a few decisions that aren’t easy to explain caused the shutdown.
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.
Following its launch in May 2018, FCoin quickly accumulated extremely high trading volumes through a new business model called “trans-fee mining.” Later, a Redditor reported that this volume was fake and the exchange was called a “scam” by another Reddit user.
FCoin’s business model appeared suspicious from the beginning. There was no airdrop or ICO at the launch. The exchange distributed 51% of its native tokens to users for reimbursing transaction fees. To encourage users to transact frequently, the exchange reimbursed 100% of the transaction fees users paid in FT tokens. More than 75% of the exchange’s daily revenue from transaction fees was paid back to the users.
Changpeng Zhao, the CEO of Binance, has called FCoin a Ponzi scheme from 2018. Replying to Jian’s post, Zhao tweeted:
I rarely called out anyone, with exceptions. On Chinese social media, I called FCoin a pyramid scheme in mid-2018. Their founder calls his own plan a "better invention than #Bitcoin". That did it for me. Who would say such a thing? About themselves? Except scammers.
Zhang said that errors had been identified in the FCoin system for many years now. He did not, however, explain why the exchange hadn’t done anything about it.
With the deepening of the investigation, we found a large number of existing data problems of dividends and mining returns, and these problems have existed for many days. As a result, a large number of users have already been through operations such as buying and selling various currencies and withdrawing cash, causing the pollution of assets.
Jian concluded by promising that he will handle the users’ email requests for withdrawals personally. Additionally, he noted that he will compensate FCoin user losses with the profits he would make from his other projects.
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