The absence of the private key holder prevents transactions, but asset security “remains intact”
OKEx, a Malta-based cryptocurrency exchange, has suspended cryptocurrency withdrawals after one of its Chinese founders was taken away by police.
Xu Mingxing was detained by police a week ago and, according to a person close to the company, has not appeared in his work-related social media group recently. Details of the investigation have not been released, but there have been recent signs of renewed law enforcement action targeting money laundering on over-the-counter (OTC) crypto trading platforms.
OKEx said in a statement that withdrawals were suspended because one of the exchange’s private key holders is currently cooperating with an ongoing investigation by the Public Security Bureau. Two people close to the exchange speculated that the key holder is likely Xu, who is known as a prominent executive with a very hands-on approach to company finances.
The exchange said it currently has “no contact” with that key holder, which prevents it from authorizing transactions. OKEx reassured customers that the incident does not compromise the safety of their assets.
Jay Hao, CEO of OKEx, wrote on Weibo that the decision to temporarily halt withdrawals was caused by personal circumstances affecting the private key holder.
This is not the first time Xu has encountered legal trouble. In September 2018 he was detained amid a dispute with investors who had suffered heavy losses on his Bitcoin exchange, OKCoin.
Many investors complained that on September 5 of that year, when the value of Bitcoin and other cryptocurrencies fell by nearly 10%, the OKCoin platform crashed. That outage caused substantial losses for traders holding crypto futures on the platform.
OKCoin and other China-based Bitcoin trading platforms previously closed operations on the Chinese mainland and moved abroad after regulators banned fundraising through initial coin offerings (ICOs) in August 2017. After that decision, Xu founded OKEx and registered the OKEx website in Malaysia; the exchange’s operators are also registered in Malta and the Seychelles.
Both OKCoin and OKEx still maintain offices in Beijing and Shanghai and enable domestic investors to trade cryptocurrency via OTC channels. Users can purchase popular cryptocurrencies from OKEx-verified sellers, a system that functions similarly to e-commerce marketplaces.