Five months ago, the cryptocurrency exchange BitForex disappeared, leaving users in distress as $57 million of their funds were transferred to a new wallet. The exchange’s social media profiles went silent, raising numerous questions and concerns among its users. Last Friday, BitForex reemerged, offering an explanation for its sudden disappearance and detailing plans to return user funds.
In February, BitForex vanished, initially attributing its downtime to “unscheduled maintenance.” However, this explanation did not align with the later revelation that staff members had been detained by police in China’s Jiangsu province. The exchange’s sudden silence and the transfer of significant user funds fueled speculation and anxiety among its users.
Reemergence and Explanation
BitForex broke its silence last Friday, revealing that its absence was due to a police investigation in Jiangsu. The company stated that staff members had been detained but did not provide specifics about the individuals involved or their roles. Despite the ordeal, BitForex announced that users would “soon” be able to withdraw their assets, although the platform will not resume trading or accept new user registrations or deposits.
Significant Distress Among Users
The prolonged disappearance caused significant distress among BitForex users, who were left without access to their funds and without clear information about what had happened. The company’s operations, like many in the cryptocurrency industry, were shrouded in ambiguity, leading to rumors and speculation.
The investigation by authorities in Jiangsu province appears to be linked to suspicions that BitForex was conducting cryptocurrency exchange operations within China, which is illegal. According to sources, Chinese authorities detained BitForex employees who had returned to China from Singapore for the New Year holidays. Former CEO Jason Luo, who stepped down just weeks before the platform went offline, denied any wrongdoing and stated that efforts were being made to resolve the situation with the help of lawyers.
BitForex has claimed to be headquartered in Hong Kong, but investigations revealed that the company does not appear to have a working office there. Addresses listed on business registry documents and press releases lead to virtual address services. This lack of transparency has further complicated the situation for users and regulators.
In March, the Hong Kong Securities and Futures Commission (SFC) labeled BitForex as a suspicious platform, suspecting it of fraudulent activities. By May 9, Hong Kong police were still investigating the exchange. Despite numerous efforts to get updates, no additional information has been provided by the police, nor have there been any responses to messages sent to BitForex’s email and Telegram accounts, or to Jason Luo.
The BitForex incident highlights the risks associated with running and working for cryptocurrency projects in China, despite the practice remaining common. China-based staff are often a more affordable option for companies based in Hong Kong and Singapore, and Chinese citizens can easily set up companies abroad while continuing operations within China. This trend has led to other notable cases, such as the arrest of Multichain founder and CEO Zhaojun He in Kunming. His arrest was followed by a significant hack of Multichain and the detention of his sister.
The resurfacing of BitForex and the promise to return user funds provide some relief to affected users, but the incident underscores the broader challenges and risks in the cryptocurrency industry. The lack of transparency, regulatory scrutiny, and the potential for illegal activities within the industry pose significant threats to both users and operators. As BitForex works to resolve the situation, the industry must address these underlying issues to build a more secure and trustworthy environment for cryptocurrency trading and investment.
